Efforts to scrutinize insurers' use of AI and private credit while also seeking greater insight into homeowners' insurance trends show that regulators are adapting to the evolving risks facing the insurance market, according to Virginia Insurance Commissioner Scott White.
White, who is also serving as president of the National Association of Insurance Commissioners this year, delivered the remarks during the Aug. 12 opening session of the NAIC summer national meeting in Columbus, Ohio.
Scott noted that the NAIC began tackling private equity's influence on insurers roughly five years ago, when it was just starting to become clear that insurers were increasingly shifting to more complex, illiquid assets. Since then, the NAIC has been "meeting this challenge" by creating new standards for assessing investment risks and "scrutinizing the ratings" it relies on.
"This has been our consistent message to policymakers, the media, and federal and international regulators," White said. Regulators met with Treasury Secretary Scott Bessent in May earlier this year to share the work that the NAIC has accomplished in the area of private credit.
"Both during and after the meeting, Treasury reaffirmed the support of the state-based system," White said.
AI impact
AI's impact on insurance is also an area of key focus for the NAIC and there is a "growing need for regulators to understand how insurers are using AI and to ensure that these systems function in ways that are fair, reliable and aligned with state laws," White said.
The NAIC is developing and piloting an AI risk evaluation supplement tool in 12 states and working to create a regulatory framework intended to bolster oversight of third-party data and model vendors.
White noted that advancements in monitoring AI use are being built on top of a foundation that includes the NAIC's adoption of AI principles and subsequent issuance of the AI model bulletin.
"Together, these initiatives clarify how existing state law is applied to ensure its use of AI and establish shared expectations across jurisdictions," White said.
Homeowners insurance
White also highlighted the NAIC's progress on addressing risks from natural catastrophes, which he said are putting "real pressure" on the homeowners insurance markets across the nation that are exacerbated by inflation, costs to rebuild and changing risk profiles.
For example, the NAIC's Center for Insurance Policy and Research released a report on July 30 that includes state-level data from 2018 through 2024 on the homeowners' property insurance market. White believes the report will help "separate broad trends from local conditions and identify where actions may be most needed."
"It shows that consumers broadly still have options in a generally strong homeowners insurance market, and that insurers continue to write and renew new business," White said. "At the same time, it shows that cost pressures are real, market stress is emerging in certain regions and availability challenges persist in higher risk geographies."
The homeowners market data call issued in March will also help regulators have a "more complete picture," White said, adding that the information collected will be "essential" in evaluating mitigation programs, analyzing trends for non-renewals and assessing availability of coverage.
