On October 25, 2023, the Financial Condition (E) Committee (the “E Committee”) of the National Association of Insurance Commissioners (“NAIC”) adopted revisions to the Property and Casualty Insurance Guaranty Association Model Act (#540) which would ensure guaranty fund coverage following insurance business transfer or corporate division transactions. The adopted draft is coverage neutral in that if there was guaranty fund coverage before the transaction the coverage would remain, but if there was not guaranty fund coverage before the transaction coverage would not result from the transaction. The adopted draft includes optional language that would provide coverage for assumed claims transactions.
The adopted revisions will be presented to the full Executive & Plenary at the Fall National Meeting in December. Proposed language was first exposed in the Spring via the Receivership Law (E) Working Group. In a matter of months public comments were received, technical revisions drafted and re-exposed, and the proposal moved up from the working group to the Receivership & Insolvency (E) Task Force which approved the revisions earlier this month and now to the E Committee. This is relatively quick and final adoption is anticipated at the Fall National Meeting. Following adoption by the NAIC Executive & Plenary, states will need to act independently to implement the revised model into their own laws.
The E Committee also unanimously received into the NAIC record written comments pertaining to the proposed Framework for Regulation of Insurer’s Investments. The Chair emphasized that E Committee working groups and task forces will not stop their current work in support of this initiative, singling out RBC initiatives and the Valuation of Securities (E) Task Force’s work on collateralized loan obligations (“CLOs”) and other structured securities. The E Committee will take oral comments at the Fall National Meeting.
Locke Lord will continue to monitor developments at the NAIC and within the E Committee specifically. If you have any questions please contact the author.