Revised NAIC Accreditation Preamble Released

The revised National Association of Insurance Commissioners (NAIC) Part A Accreditation Preamble draft specifically states the "section titled 'Life/Health and Property/Casualty Insurers' does not apply [emphasis added] to insurers organized under a state's captive statutes," according to the April 28, 2015, memorandum from NAIC staff addressed to John M. Huff (MO), the chairman of the Financial Regulation Standards and Accreditation (F) Committee.

The proposed revisions are responsive to the concerns previously expressed by Captive Insurance Companies Association (CICA) members and many others in the captive community.

The Part A Accreditation Preamble draft was first exposed for public comment in February 2015. After discussion and review of the public comments received prior to the recent NAIC Spring National Meeting, Committee F recognized "there was some confusion regarding the intended scope of the Preamble ...," according to the memorandum. As a result, the NAIC staff was instructed to clearly indicate the Preamble to Part A only pertains to those captives providing the following lines of reinsurance business.

• XXX/AXXX policies (now defined under Actuarial Guideline XLVIII (AG 48) to apply to those policies that are required to be valued under Sections 6 or 7 of the NAIC Valuation of Life Insurance Policies Model Regulation (Model #830))
• Variable annuities valued under Actuarial Guideline XLIII—CARVM for Variable Annuities (AG 43)
• Long-term care insurance valued under the NAIC Health Insurance Reserves Model Regulation (Model #10)

The following changes (as marked and tracked by the NAIC staff from the February 24, 2015, draft) are included in the revised NAIC Policy Statement on Financial Regulation Standards, Part A: Laws and Regulations, Preamble for Part A, draft issued April 28, 2015.

Scope of the Part A Standards (Excluding Risk Retention Groups Organized as Captives)

Life/Health and Property/Casualty Insurers

The following Part A standards apply to a state’s domestic insurers licensedand/or organized under its as life/health and property/casualty insurersstatutes (life/health or property/casualty insurer), but only if the insurer is a multi‑state insurer. NOTE: This section does not apply to insurers organized under a state’s captive statutes. For purposes of Part A, a life/health or property/casualty insurer that meets any of the following conditions is considered to be a multi-state insurer and subject to the Part A standards ...

Captive Life/Health Reinsurers

The following Part A standards apply toa state’s domestic insurers licensed and/or organized under its captive or special purpose vehicle statutes or any other similar statutory construct (captive insurer) those domestic captive life/health insurers, special purpose vehicles or any other entities that reinsure business that was directly written by a ceding insurer in at least two states, but only with respect to the following lines of business:

1. Policies that are required to be valued under Sections 6 or 7 of the Valuation of Life Insurance Policies Model Regulation (Model #830) (commonly referred to as XXX/AXXX policies). The application of this provision is intended to have a prospective-only effect, so that captive insurers, special purpose vehicles and any other entities that reinsure these types of policies will not be subject to the Part A standards if the policies assumed were both (1) issued prior to Jan. 1, 2015, and (2) ceded so that they were part of a reinsurance arrangement as of Dec. 31, 2014.
2. Variable annuities valued under Actuarial Guideline XLIII—CARVM for Variable Annuities (AG 43). [Drafting Note: Effective date for compliance to be determined.]
3. Long term care insurance valued under the Health Insurance Reserves Model Regulation (Model #10). [Drafting Note: Effective date for compliance to be determined.]

See the April 28, 2015, memorandum to the NAIC committee chairman and a complete copy of the draft of the revised Preamble for Part A posted on the NAIC website. The deadline for public comments is May 18.