The NAIC and the State of the Industry

At the 2015 NCCI Annual Issues Symposium, NAIC chief executive officer Ben Nelson provided his insights into many of the industry’s most immediate challenges.

The highlights:

• Insurance regulation cannot be static. It must be fluid and adapt to changes in the industry and the economy.
• Although the Federal government has tried to inject itself into insurance matters, 100% of the United States insurance marketplace is regulated by the 56 members of the NAIC.
• Cyber security will be the biggest focus of the insurance industry in the immediate future. This includes NAIC review of the data held by both regulators and carriers to ensure policyholder information is secure.
• There is tremendous opportunity for the insurance industry to innovate in the area of cyber coverage.
• Implementation of the Affordable Care Act (ACA) has been a challenge in many states. States regulators are still responsible for the oversight of health insurance carriers who are operating within the framework of the ACA.
• Solvency assessment continues to be a focus of NAIC. New models are being developed and implemented.
• Principle Based Reserving (PBR) is replacing traditional models to ensure reserves are adequate in all lines without being over-reserved.
• The use of captives by insurance companies for purposes other than managing risks is being closely monitored. Congress is concerned about these captive vehicles being used for tax avoidance rather than risk transfer.
• The sharing economy (UBER, AirBnB, etc.) create a number of insurance concerns that need to be addressed.
• The ultimate objective of regulators is to ensure that insurance companies have adequate capital to honor their policyholder obligations.
• NAIC has a working group reviewing mega-deductible programs and the potential impact they have on carrier solvency issues.