Governance procedures to get their own model law

Some industry members are concerned about the confidentiality impact of the corporate governance system across states, where some states have very strong sunshine laws that allow for much disclosure, while other states may not.

Another concern is so-called redundancy, adding to what is already in place in terms of reporting to the state regulators, while some industry representatives have expressed concern that a model law could result in provisions that expand the intended scope of the model at its inception – so-called mission creep.

The development of the Model Act would provide a means for regulators to get a better understanding of the governance practice of domestic insurers while development of its model law would also ensure the confidentiality of governance information collected from insurers, according to the working group's description. 

The working group adopted an extensive analysis of regulatory response to dealing with the open corporate governance issue. The analysis was between existing standards and international standards, company best practices, and regulatory needs.

"I am proud of this product. We continue to up and raise the bar on how we monitor for solvency – this is about raising the bar prospectively for solvency," said Steve Johnson, an active solvency modernization issues insurance regulator from Pennsylvania.  

"This is one the most important part of running a company – corporate governance. It starts at the top. This raises the bar for how we do solvency in this country," Johnson said. 

The working group also asks other groups to enhance their procedures, or include more pointed language or develop additional procedures  and guidance for best practices. 

The group will be sending work requests to other NAIC working groups and task forces to add, for example:

• An existing corrective powers supervisory element of the Hazardous Financial Condition Model Regulation into the accreditation standard for corrective action;
• Add requirements for regulators to ask pointed questions about an insurers or reinsurers governance practices and the suitability of offices and directors; and
• Allow a state commissioner wide enough authority to deem an appointed actuary unsuitable for a property/casualty insurer, as is available now to regulators for life insurance actuaries.

"AIA is willing to work with the NAIC on a model law, as long as they improve coordination of existing regulatory tools and keep their commitment to eliminate redundancy in the reporting of corporate governance," said Phil Carson, American Insurance Association Associate General Counsel. "Insurers already have numerous requirements on the reporting of corporate governance and the proposal creates the risk of additional unnecessary regulatory burdens."