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Noteworthy at the NAIC, April 3

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Noteworthy at the NAIC, April 3

The NAIC's Spring NationalMeeting is in full swing this week, as regulators and industry stakeholdersgather to discuss a range of insurance regulatory issues. To help keep up withall the action, S&P Global Market Intelligence presents a daily briefing onwhat's driving the discussion in New Orleans.

On the agenda today: a bigdata hearing, work toward a group capital calculation and a focus oninternational issues. Don't forget to send comments, announcements and tips onanything NAIC-related to acancryn@snl.comor efesta@snl.com.

Big debate over big data

A packed day of meetings kicks off with a much-anticipated hearingon how insurers use big data to inform their underwriting, marketing and claimsactivities. The two-hour event features a series of panelists from theindustry, consumer groups and academia, as regulators scrutinize how datacollection has changed the business of insurance.

Industry trade groups are expected to tout the customerbenefits of big data, arguing that it allows companies to more accurately pricetheir products, better evaluate risks and handle claims more quickly. Butconsumer representatives will likely counter by warning that regulators havelittle visibility into how companies are really using the information theyreceive and that they should make the data collection process more transparent.

The hearing is scheduled for 8 a.m. CT in the Armstrongballroom, eighth floor.

A sneak peek at NAMIC's stance:"Theuse of large quantities of data is nothing new for the insuranceindustry," Paul Tetrault, state and policy affairs counsel for theNational Association of Mutual Insurance Companies and a panelist for thehearing, said. "We'd caution the regulators against having somepresumption that increased use of information is somehow something to be afraidof."

Person to watch: Regulators are holding thehearing largely due to Center for Economic Justice Executive Director BirnyBirnbaum, who in November 2015 pushed the NAIC to take a harder look at insurers' useof big data. The Market Regulation and Consumer Affairs Committee eventuallydid adopt a charge focused on the issue but not before Birnbaum sparred withindustry groups over it.

"They don't want scrutiny of their practices,"Birnbaum said at the time, in response to industry concerns about theconfidentiality of insurers' proprietary data analyses.

Group capitalcalculation in focus

In another significant early morning meeting, the GroupCapital Calculation Working Group will take its next steps toward creating aU.S. group capital calculation. The initiative aimsto improve industry oversight across borders and keep pace with efforts on thefederal and international levels to create more uniform regulatory standardsaround the world.

The NAIC will use a risk-based capital aggregation approach indeveloping the calculation, to the delight of companies that lobbied forregulators to rely on existing capital requirements rather than creating a newmetric.

The meeting is at 8 a.m. CT in the Napoleon B/C 3 room,third floor.

Playing catch up: Industry stakeholders believethe working group will move quickly now that it's decided on an RBC approach,for fear of falling too far behind parallel work being done by both the federalgovernment and the International Association of Insurance Supervisors. TheFederal Reserve has met monthly with various companies to discuss its work oninsurance capital standards, an industry source familiar with the discussionssaid, though it has not yet finalized any of its own rules.

Donelon on the NAIC CEO search

The search for a new NAIC CEO isprogressing slowly, Louisiana Insurance Commissioner James Donelon said in animpromptu airport interview. Donelon, who was flying back to his home state onApril 2 in time to make the Spring National Meeting's openingceremonies, said the organization will likely approve the hiring of anexecutive search firm in the coming days. But there is still debate amonginsurance commissioners about what skills and attributes the NAIC needs inits next leader. 

"It's dragging, in myopinion," Donelon said of the hiring process. 

FormerPennsylvania regulator Johnson returns

Former Pennsylvania Deputy Insurance Commissioner StephenJohnson is back at work but this time as a member of the private sector.Johnson ended hisbrief retirement inMarch, taking a job with law firm Stradley Ronon Stevens & Young LLP as itsinsurance and regulatory specialist and confirming in an email that he will beback at NAIC meetings.

Vermont'sDonegan is on the way out

This is the last NAIC meeting as a regulator for VermontDepartment of Financial Regulation Commissioner Susan Donegan, who plans to step downJune 30. The departure announcement came as a surprise to regulators andindustry representatives alike, who praised Donegan's work during hertenure. Donegan in her three years as commissioner played a major role inthe NAIC's international regulatory work and was set to take over for outgoingFlorida Insurance Commissioner Kevin McCarty as the chair of the organization'sInternational Insurance Relations Committee.

Former regulator reacts: "Susan is incrediblywell-respected amongst her colleagues both domestically andinternationally," former Pennsylvania Insurance Commissioner MichaelConsedine said in an email. "It's a loss for not just the NAIC but for'Team USA.'"

The big question: Who will lead thehigh-profile International Insurance Relations Committee? McCarty is set tostep down in May andwas expected to hand the job off to Donegan. But Donegan will now leave soonafter him. Next in line is the vice chair, Tennessee Insurance CommissionerJulie Mix McPeak. However, she is already the NAIC's vice president and hassaid executiveofficers should not also lead NAIC committees.

NAIC spokesman Scott Holeman said in an email that theorganization's officers will discuss the committee's leadership, but they donot need to make a decision right away.

The International Insurance Relations Committee will meetat 4:30 p.m. CT in the Grand ballroom A/B, fifth floor.

An update fromthe IAIS

IAIS representative Andrew Stolfi will spend an hour takingquestions from insurance stakeholders, in a signal that the organization couldbe making a concerted effort to improve its communication with the U.S.insurance industry. IAIS representatives have attended NAIC committee meetingsin the past but rarely set aside time for a separate Q&A.

The session is scheduled for 5:30 p.m. CT in the Napoleon Aroom, third floor.

Model #22 gets a facelift

Anew health care-focused subgroup will weighrevisions to a model act covering various regulations tied to the oversight ofpharmacy benefit managers and prescription drugs more broadly. Consumerrepresentatives are pushing a range of updates that they say will increase thetransparency surrounding insurers' coverage of prescription drugs and ensurethat patients have sufficient access to information.

Thediscussion will happen at 11:30 a.m. CT in the Armstrong ballroom, eighth floor.

Pharmaciststrade group requests regulation of pharmacy benefit managers:"PBMsface a patchwork of regulations at the state level that are often challenged byclaims of a lack of enforcement authority, legal-preemption or lack ofknowledge from the state regulatory agency," Matthew DiLoreto, seniordirector of government affairs for the National Community PharmacistsAssociation, wrote in a letter to the subgroup. "NCPA recommends that NAICinclude language in the final amendment to Model #22 Act that would clearlygrand departments of insurance with PBM oversight authority."

One last meeting to watch

Auto InsuranceWorking Group: The committee will establishits priorities for the year under new chair and North Carolina InsuranceCommissioner Wayne Goodwin, includingthe potential collection of data to evaluate the availability and affordabilityof auto insurance. The group meets at 3 p.m. CT in the Napoleon D room, thirdfloor.