Solvency Modernization [S]
Consumers benefit from a system that ensures insurance companies are financially secure and able to pay the claims. By striving for a balance between prudence and innovation, regulators can help foster a robust marketplace where more companies of all sizes compete by offering diverse products and services.
Insurers also benefit from a solid and reliable solvency system. Competitive risks, compliance costs and economies of scale have to be taken into account, however, to ensure that solvency standards are reasonable and do not limit opportunities for growth and innovation or put sensitive information at risk. Solvency Modernization focuses on updating model language related to reinsurance, capital adequacy, group supervision, and enterprise risk management to protect against systemic risk that could endanger the economy. Revisions to the Model Holding Company Act were designed to enhance group supervision and are aimed at systemic risk, enterprise risk, and deficiencies in the oversight and regulation of non-insurance affiliates. The Own Risk and Solvency Assessment – ORSA – is part of an enterprise-risk-focused approach to solvency regulation based on the notion that regulators will get a better picture of a company if they have forward-looking information.
NAMIC continues to work with state regulators and the NAIC to assure that the Holding Company Act and ORSA achieve the goals of strengthening the solvency system without creating unnecessary obligations or risks for companies. A compliance threshold for smaller companies and strong confidentiality language are priorities in these efforts. As new legislation/regulations are considered state-by-state we seek to ensure that they are consistent with the provisions of the NAIC model and don’t unnecessarily burden mutual companies.