Holidays, summer vacations, and preparations for the upcoming August NAIC National Meeting resulted in very little activity during July.
Joint Meeting of the Life Risk-Based Capital (RBC) Working Group and Variable Annuities Capital and Reserve Subgroup – July 21, 2025
The purpose of this meeting was to discuss the May 8 exposure of the Generator of Economic Scenarios (GOES) for use in the C3 section of the Life/Fraternal RBC formula. The May exposure included three specific questions—most with multiple parts—for industry to address in their comments. Most of the discussion centered around those three questions and was quite technical. The discussion raised more questions to be addressed, mainly by the American Academy of Actuaries (Academy), at a future meeting. By the end of the meeting, the Working Group decided to expose for a 30-day comment period proposed revisions for the C-3 Phase I and Phase II calculations, as well as a formal Life RBC proposal revising the C-3 Phase I and Phase II instructions. At this time, only instructional revisions to the formula are being considered with no structural changes. The goal is to have all formula changes in place for 2026 RBC reporting.
NAIC/American Institute of Certified Public Accountants Working Group – July 28, 2025
One of the main charges of this group is to annually determine if the premium threshold stated in the Model Audit Rule (MAR) for the Management’s Report of Internal Controls is being met. At least 90% of the U.S. insurers must be subject to the report on internal controls or are SOX compliant. Based on December 31, 2024 annual statement filings, 93.9% of U.S. insurers are subject to this requirement; therefore, no adjustments need to be made to the premium threshold.
A referral from the Chief Financial Regulator Forum (Forum) was next on the agenda. In late 2024, the Forum had identified several areas of difficulty in obtaining access to relevant audit workpapers when conducting financial examinations. Specifically identified were:
- A short timeline to review read-only versions of the audit file and request copies of specific workpapers.
- Requested workpapers being provided in a mass export PDF format, limiting their usefulness.
- Provided workpapers requiring a password to be entered each time a separate workpaper is accessed.
While the Forum recognized some of the above items were security related, they also resulted in inefficiencies for regulators trying to utilize the workpapers for their activities. During the discussion, other “frustrations” were expressed, both by regulators and the CPA firms. The Working Group will form a drafting group to review the Current Examiners Attestation Template and the Best Practices: Insurance Regulator Access to Audit Documentation. The drafting group will be composed of both regulators and CPA firms, with the hope of refreshing both documents to meet current needs. During the discussion, the comment was made that some CPA firms that conduct insurance company audits are not active with the Working Group. Therefore, the drafting group is going to reach out to some of those firms in an effort to involve them in the process. It is hoped that the involvement of additional firms will help bring a fresh perspective to the process.
Financial Condition Committee – July 28, 2025
The main purpose of this meeting was to discuss received comments on the proposed reorganization of the Valuations of Securities Task Force. Seven comment letters were received, with each submitter being given the opportunity to verbally summarize their remarks. Overall, the comments were in support of the proposed reorganization, but a few questions and/or comments were provided for consideration as the restructuring is implemented. The Committee then adopted the proposal. Moving forward, policies and procedures for each of the new groups will be developed, with implementation scheduled for January 1, 2026.
Joint Meeting of the Group Solvency Issues Working Group and Own Risk and Solvency Assessment (ORSA) Implementation Subgroup – July 29, 2025
The Subgroup opened the meeting with a brief summary of the revisions that had been made to the ORSA Guidance Manual (Manual) released for comment on May 30. Attention then turned to the only comment letter received, which was from the Academy. A few additional revisions were made to the Manual based on those comments. The Subgroup then adopted the revised edition of the Manual. In turn, the Working Group also adopted the updated Manual.
Significant revisions added to the Manual include:
- Guidance clarifying that the lead state may request and review information on international premium volume to assess the applicability of the insurance group exemption outlined in the Risk Management and Own Risk and Solvency Assessment Model Act (#505).
- Direction that captives should be included in the scope of the ORSA Summary Report.
- Clarification of when insurers/groups should file their first ORSA Summary Report after exceeding the premium thresholds outlined in the Risk Management and Own Risk and Solvency Assessment Model Act (#505).
- Language indicating that the ability of the group to service existing debt—not just the level of debt—should be considered when assessing the groupwide capital adequacy.
The adoption of the revised Manual will now be considered at the Financial Conditions Committee meeting at the upcoming NAIC Summer National Meeting.
The Working Group decided to issue a public survey asking if there are other topics or needed clarifications that should be addressed by the Manual in the future.
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