One of the sessions that most interested me at the recent AICP national conference was titled “View from the Top.” The registration description promised a discussion of “the latest insurance trends and vital issues from leaders in insurance regulation” and that is exactly what was delivered. One session covered life, health and annuity topics and another, which I attended, covered property and casualty topics. The P&C Session was a panel discussion featuring New Hampshire Insurance Commissioner Roger Sevigny, Mississippi Insurance Commissioner Mike Chaney, Maine Deputy Insurance Superintendent Timothy Schott and Virginia Deputy Insurance Commissioner Mary Bannister, and all shared thoughts on current and developing issues. What is on these top regulators’ minds?
The discussion began with shared concerns on the growing regulatory need to evaluate insurer financial solvency and whether state regulatory staffing will be adequate. Under the Dodd-Frank Act, state regulators must work with Federal agencies, including the new Federal Insurance Office, and the NAIC to monitor systemic risk. New Dodd-Frank surplus lines regulation and taxation is a particular challenge, with states disagreeing over which compact to follow. More legislative reform is certainly likely in the surplus lines area. The NAIC ORSA (“Own Risk and Controls Assessment”) initiative, is another collaborative process and would require insurance organizations to self-analyze and identify internal operational risks and submit long-term operational risk management strategies to state regulators.
Another concern is the need for uniformity in producer licensing and reciprocity among states. In the regulators’ opinions, we are not quite there but passage of NARAB II (“National Association of Registered Agents and Brokers Reform Act”), a bill currently pending before Congress, would ease producer licensing without impeding state regulatory abilities.
Commissioner Chaney shared lessons learned from Hurricane Katrina, the costliest natural disaster in United States history, from which Mississippi is still recovering. Katrina was a huge wake-up call to stay vigilant and prepared. To mitigate future wind and water losses, Commissioner Chaney stressed the need to implement and enforce stronger building codes and strict flood plain zoning restrictions. The key to recovery is that storm-impacted residents must have a safe home to which they can return and restart the local economy as soon as possible after the disaster. There is a consensus that we cannot expect a Federal bailout for every catastrophe.
Other homeowner’s insurance issues were also discussed. Regulators are concerned with intercompany differences and a lack of specificity in policy language on the application and definition of hurricane deductibles. Emergency preparedness is a related issue and out-of-state adjuster licensing guidelines have come under recent regulatory scrutiny.
Finally, certificates of insurance, the subject of extensive regulation in the past year, also came up for discussion. Compliance problems seem to center on improper modifications of certificates by producers – for instance, a producer may improperly add a third party notice requirement for a building contractor’s policy cancellation on the certificate that is not in the policy. Adding an additional named insured to the certificate, but not to the policy, is another frequent transgression. The certificate may not be used to alter the terms of the policy on which it is based and these modifications are violations of law subject to market conduct enforcement.
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