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Noteworthy at the NAIC, April 5


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Noteworthy at the NAIC, April 5

The NAIC's SpringNational Meeting is in full swing this week, as regulators and industrystakeholders gather to discuss a range of insurance regulatory issues. To helpkeep up with all the action, S&P Global Market Intelligence presents adaily briefing on what's driving the discussion at the Sheraton Hotel in NewOrleans.

On the agenda today:an NAIC governance debate, the covered agreement and the Department of Labor'sfiduciary rule. Don't forget to send comments, announcements and tips onanything NAIC-related to acancryn@snl.comor

Donelon wants "coolingoff" period for NAIC members

Louisiana Insurance Commissioner James Donelon launched acampaign to bar former regulators from working at the NAIC within two years oftheir departure from office, springing the proposal on his fellow regulatorsduring the final minutes of an April 4 Executive Committee meeting.

The so-called "cooling off" period would mirror similarrules in state and federal legislatures and ensure that the organization castsa wide net in soliciting candidates for its open CEO position, Donelon said. Itwould also head off any potential conflicts of interest by ensuring thatcurrent commissioners could not apply to run the NAIC while also serving as amember.

The proposal appeared to take the insurance commissioners bysurprise, prompting NAIC President and Missouri Insurance Director John Huff tosuggest that the discussion be moved to the NAIC's Governance Review TaskForce. The task force meetsat 10:30 a.m. CT on April 5, in the Napoleon B/C 3 room, third floor.

A long-planned effort: S&P Global Market Intelligencereaders may have been less surprised by Donelon's proposal. He said in aJanuary interviewthat he planned to push for a two-year cooling off period, saying at the timethat the NAIC should not "pick from within our ranks" when it selectsits next CEO.

Quote of the day: Asked what he thought of Donelon's proposal,New Hampshire Insurance Commissioner Roger Sevigny kept it short: "Nothoughts, brain's empty," he said as he left the Executive Committeemeeting.

More regulator reaction: "There is no problem with theintegrity of the process," Vermont Department of Financial RegulationCommissioner Susan Donegan said, adding that the cooling off period is "notsomething I would endorse."

CEO search makesheadway

Overshadowed by the debate over a cooling off period is thatthe NAIC's Executive Committee approved an order for the organization toidentify executive search firms that it might use to aid its search for a newCEO. The NAIC has relied on global headhunter Egon Zehnder on multipleoccasions in the past.

Cybersecurity showdown

North Dakota Insurance Commissioner Adam Hamm wants tofast-track a proposed cybersecurity model law despite overwhelming opposition from the insuranceindustry, setting up what could be an intense next few months for the NAIC'sCybersecurity Task Force.

Industry groups at an April 4 meeting raised a host ofconcerns, including the potential for compliance issues and a lack ofuniformity across multiple states. Hamm responded by saying that the model lawin its current form is just a start to the conversation, but that henevertheless wants to work fast. His goal is to agree on a model law by theSummer National Meeting in August, though he conceded that it could be tooambitious of a timeline.

The measure of success: Hamm said that his top priority is todevelop a proposal that can win the support of at least 75% of insurancecommissioners. Meeting that threshold would make the cybersecurity model law anaccreditation requirement by the NAIC.

Countdown to the Departmentof Labor's fiduciary rule

Insurance groups will tackle a pair of closely watchedissues at the NAIC/Industry Liaison Committee, starting with the Department ofLabor's looming fiduciary rule.Trade groups representing life insurance companies and agents are slated topresent their thoughts on the new standards, which the White House isexpected to releaseon April 6.

The committee is also scheduled to discuss the ongoingdevelopment of international insurance standards, and the extent of thecollaboration between the NAIC, Federal Reserve and Federal Insurance Office.The meeting is set for 8 a.m. CT in the Armstrong ballroom, eighth floor.

The American Council of Life Insurer's angle: "Stateregulators worked hard, with ACLI's support, to build into the state regulatoryframework strong consumer protection standards for annuity sales, which the DOLrule completely ignores," the ACLI said in a 2015 letterto the NAIC.

NAIC committee weighscovered agreement-focused charge

The NAIC's Financial Condition Committee will consideradding a new chargeaimed squarely at concerns that the negotiation of a covered could alter parts of the U.S.regulatory system. The meeting is scheduled for 11 a.m. CT in the Napoleon B/C1&2 room, third floor.

The proposed charge: "Consider and develop contingencyregulatory plans to continue to protect U.S. consumers and U.S. cedinginsurance companies from potential adverse impact resulting from coveredagreement negotiations."

Risk adjustmentroundup

The Affordable Care Act's risk adjustment was the hot topic across atleast three separate sessions on April 4, as regulators weighed its impact oninsurers and whether the states should do anything about it. Insurancecommissioners discussed the program during a private roundtable, according toan agenda obtained by S&P Global Market Intelligence, before the NAIC's newCo-Op Solvency and Receivership Subgroup talked about the topic again in a second closed session.

Regulators rounded out the day by hearing a proposal fromsmall insurer coalition CHOICES arguing that the risk adjustment formula isbiased against new and fast-growing insurers on state exchanges, and askingstate regulators to limit its impact by reducing by a fixed percentage the amountinsurers pay into or receive from the program.

Also in the room: CEO Kevin Counihan fieldedquestions from regulators during the closed roundtable about risk adjustmentand special enrollment periods, among other health insurance issues,Mississippi Insurance Commissioner Mike Chaney said in an interview.

Delaware backs TerrorismRisk Insurance Act data collection

The coalition of states collecting data on insurers'terrorism risk coverage is now 12 strong,after the Delaware Insurance Department indicated it would join the group. Thestates are collecting information to gauge companies' exposure, in a processrunning parallel to the Federal Insurance Office's own data call.

Succession planning

Texas Insurance Commissioner David Mattax and WisconsinInsurance Commissioner Ted Nickel will become the NAIC's newest representativeson the International Association of Insurance Supervisors' executive committee.The two are set to replace Florida Insurance Commissioner Kevin McCarty andVermont's Donegan, following their respective departures from office.