The National Association of Insurance Commissioners (NAIC) is pursuing a new model law to allow for a framework to collect confidential information on insurers’ corporate governance practices.
The development of this model law is meant to protect the confidentiality of governance information collected from insurers and assist U.S. regulators in achieving greater consistency with international standards.
The NAIC’s Corporate Governance Working Group, which proposed the new model law, has spent several years studying the issues and has identified a need to collect and review corporate governance information of insurers in the period between onsite examinations by the states.
The full NAIC agreed and voted on this and other proposals during a July 26 NAIC Executive/Plenary Committee conference call.
The working group considered amending other existing model laws or requirements such as the Risk-Based Capital for Insurers Model Act, Own Risk and Solvency Assessment (ORSA) Model Act and the annual statement filing, but couldn’t find a framework that could be extended to allow for the collection and protection of confidential information.
In its questionnaire for evaluating the development of a model law, the working group said that the development of this model law would serve to bring about increased consistency and compliance with international standards, which is best achieved through a national standard.
However, the NAIC working group checked the box “No” for whether the proposed model law was a response to or impacted by federal laws or regulations.
One of the standards of the internationally-established Insurance Core Principles (ICPs) — to which the U.S. insurance system generally adheres — requires adequate top-level controls, checks, structures and communication in an extensive fashion and detail.
The likelihood that state legislature will adopt the model law in a uniform manner within three years of adoption by the NAIC is moderately high, according to its checklist.