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Potential Regulatory Changes

Potential Regulatory Changes. Holding Company Act (Chapter 13) Own Risk and Solvency Assessment Principle Based Reserving. Holding Company Act. Needed for Accreditation Draft legislation Introduce legislation this fall. Significant Changes. Enterprise risk r eport Supervisory colleges

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Potential Regulatory Changes

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  1. Potential Regulatory Changes Holding Company Act (Chapter 13) Own Risk and Solvency Assessment Principle Based Reserving

  2. Holding Company Act • Needed for Accreditation • Draft legislation • Introduce legislation this fall

  3. Significant Changes • Enterprise risk report • Supervisory colleges • Potential for consolidated public hearings • Transactions – Form D filings

  4. ORSA Who will need to file an ORSA Summary Report: • Insurers with more than $500 million in direct and unaffiliated assumed written premium • Insurance groups with more than $1 billion in direct and unaffiliated assumed written premium

  5. Overview • Must maintain risk management framework • Conduct assessment annually • Follow NAIC ORSA Guidance Manual • Submit ORSA Summary Report to regulators • Highly confidential document

  6. Principles-Based Reserving • DIFS favors adoption of principles-based reserving • ACLI has drafted language for amendments to Chapter 8 of the Michigan Insurance Code • Operative when 42 states representing 75% of total U.S. premium has adopted PBR • Valuation Manual provides three-year transition period

  7. Analysis/Examination Process • ORSA and Form F (enterprise risk report) will assist in focusing exams and analysis on prospective risks more than financial statements • More insight and information for analyst • Assist examiners in examination planning and focusing on procedures around the risk areas • More reliance on the lead state • Risk-focused exam/analysis processes will continue to evolve • Possibly more frequent targeted exams

  8. Lead State • One lead state • Coordinated holding company review • Coordinated examinations • Supervisory colleges

  9. Future Items Being Monitored • Corporate governance activities • Requirement for internal audit function (over $500 million in premium) • Annual filing due June 1 • Captives • International standards

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