NAIC Report Details State Insurance Regulatory Response to COVID-19
June 23, 2020
The National Association of Insurance Commissioners (NAIC) has released its first update on the state insurance regulatory response to COVID-19, noting the pandemic's impact on the NAIC's 2020 regulatory and operational priorities.
The publication, "A Report of the NAIC on the State Insurance Regulatory Response to COVID-19," focuses chronicles state insurance regulators' actions during the period from January 1 to May 31.
"The previously identified NAIC 2020 regulatory and operational priorities were founded on the assumption that we would be operating under normal market conditions," the report said. "Clearly, this is no longer the case."
Faced with the COVID-19 outbreak, the report says, in March, the NAIC made supporting US insurance regulators' efforts to manage the impact of the pandemic its "Priority One." The organization's efforts to meet that priority focused on protecting insurance consumers, ensuring the ongoing stability and operation of the US insurance sector, and delivering exceptional member service.
The report says that state insurance regulators and the NAIC have been closely monitoring insurers' financial health to ensure their continued strength and resilience, work that will continue as the COVID-19 pandemic evolves.
According to the report, evaluations of insurance companies' exposure has involved identifying those companies whose products put them at a greater risk of being impacted, as well as those companies facing an increased risk as a result of the interest rate cuts and market downturn.
"State insurance departments have worked together—through the NAIC—to develop a national information request template that gathers initial data from insurers on their exposure to potential COVID-19 claims and the impact of the related economic downturn on their assets," the report said. "More specific data requests from property-casualty insurers who write lines that could be impacted by COVID-19—such as business interruption, workers compensation, and travel insurance—have also been developed."
The report noted that most business interruption policies include exclusions for virus, bacteria, and pandemics.
"Business interruption policies were generally not designed or priced to provide coverage against communicable diseases, such as COVID-19, and therefore include exclusions for that risk," the report said. "Insurance works well and remains affordable when a relatively small number of claims are spread across a broader group, and therefore it is not typically well suited for a global pandemic where virtually every policyholder suffers significant losses at the same time for an extended period."
The report notes, however, "Moving forward, if Congress believes the business interruption insurance sector can play a vital role in addressing the policy challenges of future pandemics, we stand ready to work with Congress on such solutions."
June 23, 2020