After wrestling with a corporate governance data collection for some time, the NAIC is moving forward with a new model law to facilitate the annual collection of confidential information on insurers’ corporate governance practices.
Having a corporate governance mechanism for annual reporting of corporate governance practices of insurers provides the NAIC governance standards and practices consistency with international standards in that they can be implemented and uniformly reviewed across the United States.
One of the standards of the internationally established Insurance Core Principles (ICPs) to which the U.S. system generally adheres requires adequate top-level controls, checks, structures in place and also to effectively communicate them in an extensive fashion and detail with supervisors and others.
Generally this review happens during the examination process but not annually, as the working group recommended.
“We had a struggle for some time on how to collect information from insurers on a confidential process, so we landed on the decision to develop a new model law,” said Vermont Insurance Commissioner Susan Donegan at the Spring National Meeting of the NAIC in Houston.
Donegan is chair of the Corporate Governance Working Group, which reported its analysis and future model law recommendation to the Solvency Modernization Initiative (SMI) Task Force on Sunday.
Existing model laws and conveyances for corporate governance supervision were studied and scrapped.
For example, some felt that collecting corporate governance information under an existing model law would not come with a legal requirement to file the information on an annual basis. The collection of confidential data under another was problematic because there was in it an inherent lack of consistence in protection of analysis work papers.
“Confidentiality is a many-headed hydra. At the state level and at company level, we are wrestling with that,” Donegan said, speaking of the need to protect information as well as to review it.