Efforts to keep insurance under state jurisdiction may add drama to the upcoming National Association of Insurance Commissioners summer meeting.
The meeting, set to start June 13 in Minneapolis, will feature sessions on topics such as derivatives risk mitigation and principles-based reserving.
But Howard Mills, a former New York state insurance commissioner who is now chief advisor for the insurance group at Deloitte & Touche L.L.P., New York, says he will be especially interested in topics such as the battle between the NAIC, Kansas City, Mo., and the U.S. Securities and Exchange Commission over whether indexed annuities ought to be classified as insurance products or as securities.
“There’s a lot of background noise that makes this meeting very interesting,” Mills says.
Some insurers have sided with the NAIC and producer groups, arguing that indexed annuity returns are backed by insurers’ general account assets, and that the products should continue to be regulated by state insurance departments.
MetLife Inc., New York, has filed a brief supporting the SEC’s effort to get jurisdiction over the annuities. Indexed annuities are similar enough to variable annuities that they ought to be regulated in the same way that VA products are regulated, MetLife says.
At other insurers, “there’s a wide range of views,” Mills says. “Many have kept fairly quiet on the issue. They are happy to be on the sidelines.”
Meanwhile, insurers are continuing to press insurance regulators for changes in what they believe to be inflexible, counterproductive capital accounting rules.
Earlier this year, the NAIC decided against providing emergency approval for a package of capital rules changes proposed by the American Council of Life Insurers, Washington.
There was some talk at the time about the proposals going through the routine NAIC approval process, but, at this point, insurers are asking states for relief on a state-by-state basis, Mills says.
Arms of the NAIC are considering the ACLI proposals. The derivatives risk mitigation proposal, which is on the summer meeting agenda posted by the NAIC’s Capital Adequacy Task Force, is based on one of the ACLI recommendations, for example.
But, from insurers’ perspective, the capital rules change proposals do not seem seem to be the focus of much activity at the NAIC, Mills says.
Similarly, work on advancing PBR proposals has slowed, Mills says.
Advocates of principles-based reserving want to shift the industry toward use of actuarial judgment and modern statistical forecasting methods, and away from use of static formulas.
Supporters say a PBR system would be more rigorous than than the traditional system. But many policymakers feel that this is the wrong time to adopt proposals that may look as if they would reduce the number of rules, Mills says.
One issue that continues to generate heat at the NAIC is regulation of professional designations, and a second is the rules governing suitability of product sales made to seniors, Mills says.