Insurers with unwanted runoff blocks of business should consider the latest guidance from insurance regulators on potential transactional structures that could mitigate this issue.

On August 11, 2022, the US National Association of Insurance Commissioners’ (“NAIC”) Executive (EX) Committee adopted a request from the Restructuring Mechanisms (E) Working Group (“RM Working Group”) to reopen the Property & Casualty Insurance Guaranty Association Model Act (#540) (“Model Act #540”) for amendment to ensure that policyholders will retain guaranty fund coverage following an insurance business transfer (“IBT”) or corporate division (“CD”).

Insurers with portfolio assets that are distressed because of the COVID-19 pandemic will want to consider the extension of prior guidance from the National Association of Insurance Commissioners (NAIC) on restructuring such debt.

SUMMARY

The National Association of Insurance Commissioners Summer National Meeting, held on August 24 - 28 in San Diego, produced a number of noteworthy developments related to international, financial, and other regulatory matters. Many of these matters are interconnected on both public policy and technical grounds and involve a mixture of domestic and international political issues.

US – ONGOING CONSIDERATION BY NAIC OF RESERVE FINANCING, USE OF CAPTIVES, AND PRINCIPLE-BASED RESERVING

The NAIC’s Federal Home Loan Bank Legislation (E) Subgroup (the “FHLB Subgroup”) is considering, among other things, proposed amendments to the Insurer Receivership Model Act (“IRMA”) to provide certain exemptions for security agreements between insurance companies and Federal Home Loan Banks (“FHLBs”).

Concerned about the use of separate accounts to fund products with general account guarantees, the NAIC continues to examine these products and to consider how these products and the underlying assets should be regulated and treated for insolvency purposes.

A number of activities of potential significance have occurred in the implementation of the Dodd-Frank Act:

Surplus Lines Regulation:

On November 2nd, the Group Solvency Issues Working Group (“GSIWG”) met at the National Association of Insurance Commissioners' (NAIC) Fall National Meeting to discuss the latest exposure draft of the NAIC Own Risk and Solvency Assessment (“ORSA”) Guidan