1. Julie Garber, NAIC Sr. Manager – Solvency Regulation
2017 Accreditation Update
Julie Garber, NAIC
Sr. Manager – Solvency Regulation

2. Overview Changes Effective for 2017 Part A: Laws and Regulations
Part B1: Analysis
Part B2: Examinations
Modernization of the Accreditation Program
Upcoming Changes
Future effective date
Future Considerations

3. Part A: Laws and Regulations Part B: Preamble
Model Risk Retention Act
Life RBC Trend Test
Update to Corrective Action Standard
Part B: Preamble
Multi-state reinsurers
Part B1: Financial Analysis
Enterprise Risk Report (Form F)
Group Profile Summary
Part B2: Financial Examinations
Contractor Oversight
Changes Effective for 2017

4. Part A: Laws and Regulations
Model Risk Retention Act (#705)
Only required for those states that complete a Part A for RRGs
Section 3D on governance standards is the only significant element
Board and audit committee independence
Requirements for service providers
Changes Effective for 2017

5. Part A: Laws and Regulations
Life RBC Trend Test
2011 revisions to the Risk-Based Capital for Insurers Model Act (#312)
Updates the life trend test trigger point from 2.5 to 3.0
This is more conservative and consistent with the trigger point for Health and P/C insurers
Changes Effective for 2017

6. Part A: Laws and Regulations
Updates to Corrective Action Standard
Section 4B(10) of the Hazardous Financial Condition Model (#385) is a new significant element
If company is in HFC, commissioner may issue an order requiring company to correct corporate governance deficiencies
State can demonstrate compliance through examples
Q1Q1: The RBC trend test trigger point was updated for which type of insurer effective in 2017?
Life
Health
Property/Casualty
Risk Retention Groups
Changes Effective for 2017

7. Part B: Preamble Reinsurance Assumption
Determining “multi-state” for Part B:
Licensed/registered/operating in state(s) other than state of domicile
Accredited/certified as a reinsurer in state(s) other than state of domicile
Reinsuring business covering risks residing in at least two states
Accepting business on exported basis in state(s) other than state of domicile
NEW!
Changes Effective for 2017

8. Part B: Preamble Reinsurance Assumption
Related change for Part A became effective January 1, 2016
States may have companies that were previously single state, but are now multi-state
Part B guidelines will apply including:
Timeliness of review for analysis
Timeliness of examination reports
Consideration of General Interrogatory question to assist with identification
Note – Blanks proposal for addition of general interrogatory question was exposed by Blanks in June, comments were due July 7 and it will be considered at the Summer NM.
If adopted the proposal would be effective beginning with 2018 Q1 filings.
Changes Effective for 2017

9. Part B1: Analysis Enterprise Risk Report (Form F)
Should be reviewed and incorporated into holding company analysis
Group Profile Summary (GPS)
Serves as holding company analysis
GPS and supporting documentation should be commensurate with the nature and complexity of the insurance group
Make sure GPS contains enough information to encompass full holding company analysis.
Changes Effective for 2017

10. Part B2: Examinations Contractor Oversight
Revisions were made to the Examiners Handbook to clarify requirements of the Department Designee responsible for oversight
Designee must review certain elements of an exam
Designee must sign the exam report
Accreditation guideline: Oversight in accordance with Examiners Handbook
Designee must be employed by and conducting work solely on behalf of the state insurance department
Signature is in addition to the EIC
Changes Effective for 2017

11. Modernization of Accreditation
Accreditation reviews initially focused primarily on compliance
States are now meeting baseline standards
Focus to emphasize substance and quality of work performed
Changes effective January 1, 2017

12. Modernization Overview
Impact Parts B, C and D (Not Part A)
Review Team Guidelines
Results-Oriented Guidelines
Process-Oriented Guidelines
Workplan for Onsite Review
Replace “Scoring” with “Team’s Recommendation”
Review Team Report to the Committee

13. Modernization – Review Team Guidelines
Part B1: Financial Analysis and Part B2: Financial Examinations
No significant changes to content/topics covered
Adds a qualitative element to most standards (results-oriented guidelines)
Maintains basic requirements (process-oriented guidelines)
Discuss weighting differences
Changes Effective for 2017

14. Modernization – Review Team Guidelines
Example: b) Communication of Relevant Information
Process-Oriented Guideline 4 “At the beginning of each examination, the examiner should obtain input from the financial analyst regarding areas of concern and specific issues to address during the examination.”
Results-Oriented Guideline 1 “…consideration should be given to the examiner’s utilization and incorporation of pertinent information from the financial analysis in planning and conducting examination procedures.”

15. Modernization – Review Team Guidelines
Part B3: Department Procedures and Oversight
No significant changes to:
a) Information Sharing and
b) Procedures for Troubled Companies
New standard: c) Department Oversight
“Department management should be involved in solvency monitoring activities for its domestic industry to ensure appropriate oversight of staffing, company interactions and key solvency issues with the ability and willingness to take action, as deemed appropriate.”
Interviews with senior management and commissioner
Changes Effective for 2017

16. Modernization – Review Team Guidelines
Part C: Organizational and Personnel Practices
Enhanced current standards by adding specific guidelines
Examples include state’s ability to provide training, hire and retain qualified employees, and provide competitive career paths and pay structures
Added d) Use of Contract Personnel
Ensure those hired as contractors are held to the same standards as state employees
Changes Effective for 2017

17. Modernization – Review Team Guidelines
Part D: Organization, Licensing and Change of Control of Domestic Insurers
Reorganized standards/guidelines
Sufficient Qualified Staff and Resources
Primary Applications
Form A Filings
No significant changes to topics for review Q4
Q4: Which of the following is a brand new standard in 2017?
B1(d): Financial Analysis – Priority-Based Analysis
B2(c): Financial Examinations – Use of Specialists
B2(g): Financial Examinations – Scheduling of Examinations
B3(c): Department Procedures and Oversight – Department Oversight
Changes Effective for 2017

18. Modernization – Onsite Workplan
Replace “Scoring” with “Review Team Recommendation”
Allows team members to consider issues as a whole and give proper weight to those that are most significant
Prevents a state from leaning too much on basic compliance when quality is lacking
Encourages emphasis on quality and substance
Changes Effective for 2017

19. Modernization – Review Team Report
Dashboard
Includes basic facts such as team members and number of domestic insurers
Executive Summary
Review Team’s Recommendation
Positive Attributes
Key Areas for Improvement
Review Team’s Discussion
Changes Effective for 2017

20. Upcoming Changes Part A: Laws and Regulations
ORSA
Credit for Reinsurance
Principle-Based Reserving
Corporate Governance (pending adoption)
Annual Disclosure
Internal Audit Requirements
2014 Revisions to Holding Company (pending adoption)
Part B: Financial Analysis (none at this time)
Part B: Financial Examinations (none at this time)

21. Upcoming Changes Part A: Laws and Regulations – Example Timeline Date
Action
2014
Model adopted by NAIC
Spring 2015
Accred. Cmte exposes for consideration as potential standard (30-days)
Summer 2015
Based on comments, Cmte will expose for a 1-year period beginning Jan 1
2016
1-year exposure period (Jan – Dec)
Spring 2017
Cmte discusses comments received
Summer 2017
Cmte votes on standard
Fall 2017
Exec/Plenary votes on standard
2-year period for states to adopt
Jan 1, 2020
Effective for accreditation
This slide is optional and can be removed or skipped over if time is too tight.

22. Future Effective Date: 2018
Upcoming Changes
Own Risk and Solvency Assessment (ORSA)
Requires insurers/groups to
Maintain a risk management framework and regularly perform an own risk and solvency assessment (ORSA)
Annually file an ORSA Summary Report
Exempts:
Insurers < $500 million premium
Groups < $1 billion premium
Part B (Exam/Analysis) Guidelines referred to F Cmte with expected effective date of Jan. 1, 2018
Note – Part B referral will be exposed by F Cmte at Summer meeting and expected to be adopted at Fall with effective date of 1/1/18.
Proposed guideline is high-level, expects ORSA review to be completed and applicable risks brought into either analysis or examination process. But team will not be reviewing the ORSAs themselves.
Also – the referral does not currently include timeliness expectations as the process is too new to set clear deadlines. We expect another referral on timeliness in the next year.
Pending
Future Effective Date: 2018

23. Future Effective Date: 2019
Upcoming Changes
Credit for Reinsurance
Requires all states to adopt Models #785 and #786 requiring reduced collateral provisions
Previous requirement of 100% collateral
Changes increase consumer protection:
Increased scrutiny to certified reinsurers
Review of effective supervision by the Qualified Jurisdiction (E) Working Group
Passporting (allowing reliance by other states) requires increased financial analysis by the Reinsurance Financial Analysis (E) Working Group
Future Effective Date: 2019

24. Future Effective Date: 2020
Upcoming Changes
Principle-Based Reserving
Revisions were made to the Standard Valuation Law (#820) in 2009
Significant elements added to the Liabilities and Reserving standard
Impacts reserving for life companies as well as fraternals
Future Effective Date: 2020

25. Expected Effective Date: 2020
Upcoming Changes
Corporate Governance Annual Disclosure Model Act (#305) and Model Regulation (#306)
Annual collection of information on company governance practices (new filing)
Applicable to all U.S. Insurers
Disclosure filed annually to domestic or lead state
Flexibility in level at which information is to be provided
Ultimate parent, holding company or insurer
Data collection includes:
corporate governance framework and structure, board of directors policies and procedures, management policies and procedures, oversight of critical risk areas
Expected Effective Date: 2020

26. Expected Effective Date: 2020
Upcoming Changes
Model Audit Rule (#205)
Revised to incorporate internal audit requirement for large insurers
Insurer > $500 million in premium
Groups > $1 billion in premium
Internal audit function must provide independent assurance
Areas of assurance
Reporting requirements
Expected Effective Date: 2020

27. Expected Effective Date: 2020
Upcoming Changes
2014 Revisions to Holding Company Model
Group-wide supervision of Internationally Active Insurance Groups (IAIGs)
Authority to act as group-wide supervisor
Factors to determine group-wide supervisor
Role of group-wide supervisor
F Committee will need to determine application of standard
Any state that is Lead State of an IAIG
Any state that is Lead State of an IAIG + any state that is the domestic regulator for any insurer that is part of an IAIG
All states Q6
Q6: When will the ORSA model law become effective for accreditation purposes?
January 1, 2017
January 1, 2018
January 1, 2019
January 1, 2020
Expected Effective Date: 2020

28. Summary of Part A Changes
January 1, 2017
Model Risk Retention Act (#705)
RBC Life Trend Test (#312)
Section 4B(10) of Hazardous Financial Condition Model (#385)
January 1, 2018
ORSA (#505)
January 1, 2019
Credit for Reinsurance (#785 and #786)
January 1, 2020
Principle-Based Reserving (#820)
Corporate Governance (#305 and #306)
Model Audit Rule (#205)
2014 Holding Company Model (#440)

29. Future Considerations
Term and Universal Life Insurance Reserve Financing Model Regulation (#787) and the 2016 Changes to the Credit for Reinsurance Model Law (#785)
Provide authority concerning certain captive transactions (XXX/AXXX, long-term care, VA, etc.)
F Committee exposed at 2017 Spring Meeting, discussion of significant elements will continue at the Summer National Meeting
Proposed effective date: January 1, 2020

30. Future Considerations
Financial Analysis Risk-Focused Framework
Analysis process undergoing significant changes to become more risk-focused
Expect referral regarding accreditation guidelines at Summer National Meeting with an effective date of January 1, 2018
The underlying goals of the proposed guidelines do not change significantly and still focus on ensuring appropriate coverage/analysis of key issues facing each insurer.

31. Contact Information/Questions?
Becky Meyer, Senior Accreditation Manager or
Sara Franson, Accreditation Program Manager or
Sherry Shull, Accreditation Program Specialist or
Julie Garber, Senior Manager II – Solvency Regulation or