Proceedings of the NAIC

1358 Pages·2016·14.93 MB·English

Spring Volume II
2016 PROCEEDINGS
OF THE
National Association
of Insurance Commissioners
2016 Spring National Meeting
April 3 – 6, 2016
Held at the
Sheraton New Orleans and New Orleans Marriott
New Orleans, Louisiana
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TABLE OF CONTENTS
Volume I
Certificate of Incorporation of National Association of Insurance Commissioners—
A Nonstock Corporation............................................................................................................................................. i
Bylaws of the National Association of Insurance Commissioners ............................................................................... iv
NAIC Policy Statement on Open Meetings ................................................................................................................. xii
NAIC Committee Structure ........................................................................................................................................xiii
NAIC Executive (EX) Committee .............................................................................................................................. xiv
NAIC Committee, Subcommittee and Task Force Membership ................................................................................. xv
NAIC Members by Zones ........................................................................................................................................ lxxvi
Members of the National Association of Insurance Commissioners ...................................................................... lxxvii
Tenure of Members .............................................................................................................................................. lxxviii
Meeting Record ......................................................................................................................................................... xcii
OPENING SESSION .................................................................................................................................................1-1
SYNOPSIS .................................................................................................................................................................2-1
EXECUTIVE (EX) COMMITTEE AND PLENARY ...............................................................................................3-1
EXECUTIVE (EX) COMMITTEE ............................................................................................................................4-1
Cybersecurity (EX) Task Force ......................................................................................................................... 4-15
Financial Stability (EX) Task Force .................................................................................................................. 4-21
Governance Review (EX) Task Force ............................................................................................................... 4-25
Government Relations (EX) Leadership Council .............................................................................................. 4-29
International Insurance Relations (EX) Leadership Group ............................................................................... 4-30
Principle-Based Reserving Implementation (EX) Task Force ........................................................................... 4-31
Producer Licensing (EX) Task Force ................................................................................................................ 4-44
Speed to Market (EX) Task Force ..................................................................................................................... 4-50
INTERNAL ADMINISTRATION (EX1) SUBCOMMITTEE
Information Systems (EX1) Task Force ..............................................................................................................5-1
LIFE INSURANCE AND ANNUITIES (A) COMMITTEE .....................................................................................6-1
Life Actuarial (A) Task Force ........................................................................................................................... 6-10
HEALTH INSURANCE AND MANAGED CARE (B) COMMITTEE ...................................................................7-1
Health Actuarial (B) Task Force ..................................................................................................................... 7-222
Regulatory Framework (B) Task Force ........................................................................................................... 7-362
Senior Issues (B) Task Force ........................................................................................................................... 7-374
Volume II
PROPERTY AND CASUALTY INSURANCE (C) COMMITTEE .........................................................................8-1
Casualty Actuarial and Statistical (C) Task Force ............................................................................................. 8-84
Surplus Lines (C) Task Force .......................................................................................................................... 8-118
Title Insurance (C) Task Force ........................................................................................................................ 8-125
Workers’ Compensation (C) Task Force ......................................................................................................... 8-137
MARKET REGULATION AND CONSUMER AFFAIRS (D) COMMITTEE ........................................................9-1
Antifraud (D) Task Force .................................................................................................................................. 9-81
Market Information Systems (D) Task Force .................................................................................................... 9-85
FINANCIAL CONDITION (E) COMMITTEE ....................................................................................................... 10-1
Accounting Practices and Procedures (E) Task Force ................................................................................... 10-132
Capital Adequacy (E) Task Force ................................................................................................................. 10-429
Examination Oversight (E) Task Force ......................................................................................................... 10-581
Receivership and Insolvency (E) Task Force ................................................................................................ 10-585
Reinsurance (E) Task Force .......................................................................................................................... 10-637
Risk Retention Group (E) Task Force ........................................................................................................... 10-876
Valuation of Securities (E) Task Force ......................................................................................................... 10-877
FINANCIAL REGULATION STANDARDS AND ACCREDITATION (F) COMMITTEE ................................ 11-1
INTERNATIONAL INSURANCE RELATIONS (G) COMMITTEE .................................................................... 12-1
NAIC/CONSUMER LIAISON COMMITTEE ........................................................................................................ 13-1
NAIC/INDUSTRY LIAISON COMMITTEE .......................................................................................................... 14-1
NAIC/STATE GOVERNMENT LIAISON COMMITTEE ..................................................................................... 15-1
INDEX ...................................................................................................................................................................... 16-1
NAIC Proceedings – Spring 2016 8-1

PROPERTY AND CASUALTY INSURANCE (C) COMMITTEE

Property and Casualty Insurance (C) Committee April 5, 2016, Minutes ................................................................................ 8-2
Property and Casualty Insurance (C) Committee March 9, 2016, Minutes (Attachment One) ......................................... 8-6
Affordable Care Act Medical Professional Liability (C) Working Group April 4, 2016, Minutes
(Attachment Two) ...................................................................................................................................................... 8-8
Affordable Care Act Medical Professional Liability (C) Working Group Dec. 14, 2015, Minutes
(Attachment Two-A) ......................................................................................................................................... 8-10
Auto Insurance (C/D) Study Group April 3, 2016, Minutes (Attachment Three) ........................................................... 8-13
Catastrophe Insurance (C) Working Group April 4, 2016, Minutes (Attachment Four) ................................................. 8-16
Consumer Outreach and Assistance Post-Disaster (C) Subgroup March 17, 2016, Minutes
(Attachment Four-A) ......................................................................................................................................... 8-21
Consumer Outreach and Assistance Post-Disaster (C) Subgroup March 10, 2016, Minutes
(Attachment Four-B) ......................................................................................................................................... 8-24
Consumer Outreach and Assistance Post-Disaster (C) Subgroup Feb. 23, 2016, Minutes
(Attachment Four-C) ......................................................................................................................................... 8-26
Catastrophe Response (C) Working Group and Post-Catastrophe Regulatory Guidance (C) Subgroup
April 5, 2016, Minutes (Attachment Five) ............................................................................................................... 8-28
Catastrophe Response (C) Working Group April 12, 2016, Minutes (Attachment Five-A)..................................... 8-32
Climate Change and Global Warming (C) Working Group April 3, 2016, Minutes (Attachment Six) ........................... 8-33
Creditor-Placed Insurance Model Act Review (C) Working Group March 2, 2016, Minutes
(Attachment Seven) .................................................................................................................................................. 8-38
Creditor-Placed Insurance Model Act Review (C) Working Group Feb. 17, 2016, Minutes
(Attachment Eight) ................................................................................................................................................... 8-41
Creditor-Placed Insurance Model Act Review (C) Working Group Feb. 5, 2016, Minutes
(Attachment Nine) .................................................................................................................................................... 8-43
Creditor-Placed Insurance Model Act Review (C) Working Group Jan. 22, 2016, Minutes
(Attachment Ten) ..................................................................................................................................................... 8-45
Crop Insurance (C) Working Group April 3, 2016, Minutes (Attachment Eleven) ......................................................... 8-47
Earthquake (C) Study Group April 3, 2016, Minutes (Attachment Twelve) ................................................................... 8-49
Sharing Economy (C) Working Group April 3, 2016, Minutes (Attachment Thirteen) .................................................. 8-52
Terrorism Insurance Implementation (C) Working Group April 4, 2016, Minutes
(Attachment Fourteen) .............................................................................................................................................. 8-54
Transparency and Readability of Consumer Information (C) Working Group April 3, 2016, Minutes
(Attachment Fifteen) ................................................................................................................................................ 8-56
A Shopping Tool for Automobile Insurance, April 3, 2016, Draft (Attachment Fifteen-A) ..................................... 8-58
A Consumer’s Guide to Auto Insurance, April 3, 2016, Draft (Attachment Fifteen-B) ........................................... 8-68
Blanks Proposal Related to Private Flood Insurance, April 5, 2016 (Attachment Sixteen) ............................................. 8-80
© 2016 National Association of Insurance Commissioners
8-2 NAIC Proceedings – Spring 2016
Date:4/18/16
Property and CasualtyInsurance(C)Committee
New Orleans, LA
April5,2016
The Property and Casualty Insurance (C) Committee met in New Orleans, LA, April 5, 2016. The following Committee
members participated:Teresa D. Miller, Chair (PA);Anne Melissa Dowling,Co-Vice Chair (IL); Raymond G. Farmer, Co-
Vice Chair (SC); Lori K. Wing-Heier (AK); Jim L. Ridling (AL); Katharine L. Wade (CT); Stephen C. Taylor (DC); James J.
Donelon (LA); Al Redmer Jr. (MD); John D. Doak represented by Buddy Combs and Tyler Laughlin (OK); John G.
Franchini (NM); Laura N. Cali (OR); Larry Deiter (SD); Jacqueline K. Cunninghamrepresented by Rebecca Nichols (VA);
and Michael D. Riley (WV). Also participating was: Nick Gerhart (IA).
1. Adopted its March 9Minutes
Commissioner Calimade a motion, seconded by Mr.Bradner, to adopt the Committee’s March 9minutes(Attachment One).
The motion passed.
2. Adopted its Task Force and Working Group Reports
Commissioner Cali made a motion, seconded by Mr.Bradner, to adopt the reports of the Committee’s task forces and
working groups: the Casualty Actuarial and Statistical (C) Task Force; the Surplus Lines (C) Task Force; the Title Insurance
(C) Task Force; the Workers’ Compensation (C) Task Force; the Advisory Organization Examination Oversight (C) Working
Group; the Affordable Care Act Medical Professional Liability (C) Working Group (Attachment Two); the Auto Insurance
(C/D) Study Group (Attachment Three); the Catastrophe Insurance (C) Working Group (Attachment Four); the Catastrophe
Response (C) Working Group (Attachment Five); the Climate Change and Global Warming (C) Working Group (Attachment
Six); the Creditor-Placed Insurance Model Act Review (C) Working Group March 2, minutes(Attachment Seven);Feb. 17,
minutes(Attachment Eight);Feb. 5,minutes(Attachment Nine) and Jan. 22, minutes(Attachment Ten);the Crop Insurance
(C) Working Group (Attachment Eleven); the Earthquake (C) Study Group (Attachment Twelve); the Public Adjuster (C/D)
Working Group; the Risk Retention (C) Working Group; the Sharing Economy (C) Working Group (Attachment Thirteen);
the Terrorism Insurance Implementation (C) Working Group (Attachment Fourteen); and the Transparency and Readability
of Consumer Information (C) Working Group (Attachment Fifteen). The motion passed.
3. Adopted an Extension for Revisions to Model #375
Commissioner Cali made a motion, seconded by Mr.Bradner, to adopt an extension for revisions to the Creditor-Placed
Insurance Model Act(#375). The motion passed.
4. Adopted Revisionof Charges for the Surplus Lines (C) Task Force
Director Farmer explained that, on Feb. 8, the Surplus Lines (C) Task Force approved a merger of the Surplus Lines
Financial Analysis (E) Working Group with the IID Plan of Operation (C) Review Group into a renamed Surplus Lines (C)
Working Group that will report to the Surplus Lines (C) Task Force. He explained this merger will allow the members of the
Surplus Lines Financial Analysis (E) Working Group to remain better connected to the requirements within the International
Insurers Department Planof Operation for Listing of Alien Non-Admitted Insurersand any future needed amendments to that
plan.
Director Donelonmade a motion, seconded byCommissioner Ridling,to adoptthe revised chargetorestructurethe groups,
including thecorresponding revision of charges for the Surplus Lines (C) Task Force.The motion passed.
5. Adopted a Blanks Proposal Related to Private Flood Insurance
Director Dowling explained that the Committee previously exposedfor public commentablanks proposal concerning private
flood insurance data. She said the collection of private flood insurance data is a 2016 Committee charge. She said collection
of this data would allow state insurance regulators to capture the entire spectrum of flood data and will be useful to regulators
and policymakers when evaluating proposed changes to the National Flood Insurance Program (NFIP).
© 2016National Association of Insurance Commissioners 1
NAIC Proceedings – Spring 2016 8-3
Director Dowling explained that a comment was received from the National Association of Professional Insurance Agents
(PIA) that generally supports the proposal. She said the American Insurance Association (AIA) desires a change to the
definition and prefers that the data be voluntary for the first year. Angela Gleason (AIA) said the AIA would like a
clarification on the data collected, explaining that it is not just for policies equivalent to NFIP policies. Director Dowling said
a comment from the National Association of Mutual Insurance Companies (NAMIC) suggests a separate filing.
JonathonRogers (NAMIC) explained that there might be a more cost-effective way to collect the data such as through a
general interrogatory. Director Dowling said Birny Birnbaum (Center for Economic Justice—CEJ) submitted a comment
callingfor a third category, in addition to NFIP and private coverage, to cover creditor-placed flood insurance. Mr.Birnbaum
said a lot of the private flood insurance policies sold have been force-placed insurance policies. He said he would like either a
new line of business for force-placed flood insurance policies or a change to the definition stating that lender-placed flood
insurance is also being requested. He said insurers should have time to collect this data and it is not cost-prohibitive.
Director Dowling said the definition could be clarified to explicitly state that private flood insurance includes lender-placed
policies. Mr.Bradner said he has had experience with lender-placed policies being more affordable and with broader
coverage than NFIP policies. He said he isin favor of collecting the additional data. Mr.Birnbaum said some force-placed
flood policies are sold as excess to NFIP policies, with coverage abovethe$250,000 limits.
Director Wing-Heiermade motion, seconded by Commissioner Cali, to adopt the blanks proposal with an edit clarifying that
lender-placed flood data would also be collected. The motion passed.(Attachment Sixteen)
6. Heard an Update on Insurance Thought Leadership Conference
Commissioner Gerhart explained he, Commissioner Dave Jones (CA) and Commissioner Ted Nickel (WI) attended an
Insurance Thought Leadership conference in January that consisted of industry CEOs and technology experts.He said topics
covered included Google’s autonomous vehicle, car-sharing and comparison-shopping websites. He said developments to
auto insurance have the possibility of being disruptors to the insurance industry. He said Google believes autonomous
vehicles will be covered under product liability policies rather than traditional auto insurance. He said the Iowa Insurance
Department will be having a Global Insurance Symposium in May to discuss similar technological issues that state insurance
regulators have a need tounderstand.
7. Receivedan Update on the Big Data (D) Working Group
Commissioner Cali explained that the Big Data (D) Working Groupis charged with examining insurers’ use of big data for
claims, marketing, underwriting and pricing,as well as exploring the potential opportunities for the regulatory use of big data
to improve the efficiency and effectiveness of market regulation. She said the Working Group held a public hearing April3
to hear from various interested parties on this issue, adding that the Working Group will meet May 19 at the NAIC/NIPR
Insurance Summit in Kansas City, MO.
8. Heard Presentations from Interested Parties Regarding the NFIP
Director Dowling explained that the Committee has discussed the 2017 reauthorization of the NFIP and the role the NAIC
will play in recommending potential reforms to the program. She said the Committee will receive recommendations for
reforms from interested parties in order to inform the Committee as it formulates its recommendations.
Tom Glassic (Property Casualty Insurers Associationof America—PCI) said the private marketis interested in taking on risk
within the NFIP. He said stakeholders should all work together in preparation of the 2017 reauthorization of the NFIP. He
said the industry believesa lot more peopleshould have flood coverage. He said the market for flood insurance has not been
normal for 40 years, so a long-term reauthorization is essential. He said that as there is a move toward a private market
through a transition period, there may be need for development of a residual market. He said the NAIC has a role in
educating the U.S. Congress and stakeholders on these issues.
Director Farmer asked how many PCI members currently write flood insurance. Mr.Glassic said not many, as most of the
risk is currently being written by surplus lines writers. Mr.Glassic said a congressional bill clarifying that private flood
insurance meets lending requirements will help create a robust market. He said surplus lines writers would step up first,
followed by the admitted market.
© 2016National Association of Insurance Commissioners 2
8-4 NAIC Proceedings – Spring 2016
Tom Santos (AIA) said the AIA encourages support for NFIP reforms that create a broader market. He said the AIA supports
the continued movement toward risk-based pricing for the NFIP. The AIA wantsa more transparentand simplified process
that consumers are able to understand. The AIA also wants to make sure that experience data is shared with the marketplace
to limit adverse selection. Mr.Santos said a movement away from subsidized NFIP rates will lead to increased private
writings of the flood risk.
Paul Tetrault (NAMIC) said NAMIC is in favor of a long-term reauthorization of the NFIP until the NFIP moves toward
actuarial rates and the private market can move in. He said subsidies mask the true risk, hamper recovery and create
disincentives. Mr.Tetrault said NAMIC supports actuarial rates but realizes this will be done over the long-term. In the
meantime, NAMIC supports means testing to support affordability. He also said there is a lack of historical data for insurers
to rely on, noting that access to data is essential to assessingrisk. He said current write-your-own companies are effectively
barred from providing private flood insurance. He said the non-compete clause needs to be eliminated. Mr.Tetrault also
spoke in favor of an increase in mitigation funding through grants and property buyouts.
Director Farmer said South Carolinahasworked with academics tolook at a residual market for flood risk. He said they were
in favor of rate increases over a period of time. Mr.Tetrault said actuarial rates are needed. Commissioner Donelon asked
whether NAMIC favors a longer glide path to actuarial rates than what is contained within the current law. Mr.Tetrault said
NAMIC encourages a longer glide path than what is in the original legislation. He said NAMIC recognizes the political
reality that an extended time period is needed. Commissioner Donelon asked about the public availability of loss data with
respect to an analysis Lloyd’s conducted using NFIP loss records. Director Farmer asked whether a Freedom of Information
Actrequest had ever been submitted for the claims data. Mr.Tetrault said he would follow up with additional information on
the availability of the NFIP loss data.
Bradley Kading (Association of Bermuda Insurers and Reinsurers—ABIR) said there is a unique opportunity forstakeholders
to engage in NFIP reform issues early in the process. He said there are three principal factors creating an opportunity for
policymakers to increase flood insurance penetration in the private sector: 1) development of new flood catastrophe models;
2) the NFIP’s glide path to risk-based pricing; and 3) abundant capital available to accept catastrophe risk. He said ABIR
members currentlywrite flood insurance in several ways, but principally on commercial insurance contracts, in surplus lines
markets and in reinsurance markets. He encouraged state insurance regulators to continue to engage with members of
Congress on NFIP reauthorization legislation. He said the NFIP should move toward risk-based pricing and provide subsidies
for low-income individuals. He said the NFIP is needed but, over the long-term, it would best be designed as a residual
market that protects people whocannot buy flood insurance in private markets.
Director Dowling asked whether rebuilding should occur in certain high-loss locations. Mr.Kading said retreat is an issue
and investment should be spent on planning. Director Farmer asked whether the NFIP can be considered a residual market
currently. Mr.Kading said it cannot be considered a residual market because it functions as a market of first resort.
DirectorFarmer asked whether ABIR members are concerned about the debt of the NFIP because they are not taxpayers.
Mr.Kading said ABIR members are subject to sales tax regardlessof their profitsor losses.
Lauren Pachman (PIA) said there needs to be a balance between long-term reauthorization and the fiscal condition of the
NFIP. She acknowledged the importance of independent agents and actuarial rates. She said the PIA supports the collection
of data through the financial statement blanks,so the capacity of the market can be examined. She said the PIA supports the
eventual privatization of flood insurance, but the market is not ready yet. She said risk-based rates should be implemented
gradually.
Commissioner Donelon noted that the current glide path toward actuarial rates does not include a payback of debt to the
U.S.Treasury. Director Dowling asked about PIA members’ experience in the marketplace currently.Ms.Pachman said PIA
members recognize the unsustainability of the program and desire a minimum five-year reauthorization of the program.
Jake Clark (Guy Carpenter) said Guy Carpenter has worked closely with representatives from the Federal Emergency
Management Agency (FEMA), in support of efforts to study and improve the means through which FEMA might manage
flood risk. He said Guy Carpenter has worked on two studies commissioned by FEMA. Mr.Clark noted that loss trends are
getting worse, homeowners and businesses are increasingly at risk, and the financial resources available to government at
every level are increasingly stressed.
© 2016National Association of Insurance Commissioners 3
NAIC Proceedings – Spring 2016 8-5
Mr. Clarksaid technologyenablesa multitude of stakeholders to understand and manage the peril of flood like never before.
He said technology must be harnessed to the benefit of policyholders and other entities exposed to flood risk. He also saidthe
flood product itself needs to be simplified and modernized.
Dennis Burke (Reinsurance Association of America—RAA) said RAA is a member of the SmarterSafer coalition, which
believes the NFIP should be reauthorized and reformed to ensure it is sustainable, that it canbetter protect taxpayersand to
ensure there are sufficient incentives to resiliency. He said the NFIP provides critical and much needed insurance coverage
for those at risk of flooding; however, the increasing scale of flood events and the resulting damages have madeitclear that
the current NFIP program is unsustainable. He said the program was not designed to accommodate major catastrophic events
and it fails to adequately deter new development in areas vulnerable to flooding, which leads to further environmental
degradation. He also said the program does not do enough to encourage the states, communities and individuals to reduce
their vulnerability to current and future flood risk. Mr.Burke said the NFIP should be reformed to better protect people in
harm’s way, better protect taxpayers and better protect the environment. Any reauthorization of the NFIP should include
improved and accessible mapping; a closer linkage of NFIP and hazard-mitigation programs; a move toward risk-based rates,
with means-tested subsidies; and incentives to identify, protect and restore natural resources that reduce risk. He also said
Congress should clarify that private flood insurance counts for purposes of mandatory purchase.
Commissioner Donelon said he has been told private insurers can write a policy similar to the NFIP in nearly every location.
Commissioner Ridling said there is a possibility the NFIP can become a residual market, but expressed concern that the
losses will go to the NFIP while the premiumsgo to private insurers.
James MacGinnitie(American Academy of Actuaries—Academy)said any renewal and changes to the NFIP should be based
on actuariallysound projections of cost. He said any subsidies should be explicitly identified. He noted that flood and storm
modeling has advanced rapidly in recent years. He said geospatial data has improved, which can help build the private
market. He said the Academy is updating a monograph on the NFIP.
Sonja Larkin-Thorne (Consumer Advocate) said she recently had issues with flood insurance,including a mortgage company
saying she no longer needed flood insurance and an insurance company requiring an elevation certificate. She said problems
arise with conflicting flood zone ratings. She said consumers have to pay for FEMA’s errors. She said more consumer
support is needed in understanding NFIP policy language and elevation certificates and in dealing with changes in flood zone
designations through a Letter of Map Amendment.
Director Dowling noted that the Committee would meet viaconference call soon in order to hear from additional interested
parties about potential NFIP reforms.
Having no further business, the Property and Casualty Insurance (C) Committee adjourned.
W:\National Meetings\2016\Spring\Cmte\C\4-C.docx
© 2016National Association of Insurance Commissioners 4
8-6 NAIC Proceedings – Spring 2016
AttachmentOne
Property and Casualty Insurance (C) Committee
4/5/16
Date: 4/14/16
Property and Casualty Insurance (C) Committee
Conference Call
March 9, 2016
The Property and Casualty Insurance (C) Committee met via conference call March 9, 2016. The following Committee
members participated: Teresa D. Miller, Chair (PA); Anne Melissa Dowling, Co-Vice Chair (IL); Raymond G. Farmer, Co-
Vice Chair (SC); Lori K. Wing-Heier represented by Mike Ricker (AK); Jim L. Ridling (AL); Katharine L. Wade represented
by George Bradner (CT); Stephen C. Taylor (DC); James J. Donelon (LA); Al Redmer Jr. (MD); John G. Franchini
represented by Anna Krylova (NM); Laura N. Cali represented by Eric Cutler (OR); Larry Deiter (SD); and Michael D. Riley
(WV).
1. Adopted its 2015 Fall National Meeting Minutes
Acting Director Dowling made a motion, seconded by Commissioner Ridling, to adopted the Committee’s Nov. 21, 2015,
minutes (see NAIC Proceedings – Fall 2015, Property and Casualty Insurance (C) Committee). The motion passed.
2. Heard an Update on National Flood Insurance Program (NFIP) Reauthorization
Commissioner Miller explained that one of the Committee’s charges in 2016 is to develop a legislative proposal to make
improvements to the National Flood Insurance Program (NFIP), including ways to improve flood insurance coverage through
greater reliance on the private sector. Commissioner Miller noted that she testified in January on behalf of the NAIC before
the U.S. House Financial Services Subcommittee on Housing and Insurance in favor of H.R. 2901, the Flood Insurance
Market Parity and Modernization Act. She said the bill is meant to help facilitate the development of the private flood market
and address some issues that have made it difficult for companies to offer private flood insurance products. She said the
Committee would want to stay on top of the issue and offer expertise as needed since reauthorization reforms will have
significant impact on consumers and the industry.
Ethan Sonnichsen (NAIC) said the NAIC has not typically expressed a formal opinion on prior reauthorizations of the NFIP.
He said this is partly because the NFIP is a federal program. He said state regulators do have an interest in the program
because of the consumer experience that happens at the same time as the purchase of homeowners insurance, which leads to
consumers contacting state insurance regulators when there are issues. He said there is a small but growing appetite of the
private sector to take on some of the flood insurance risk. He said it would be good for regulators to have a conversation
about NFIP now, well ahead of its next reauthorization. He said issues that are likely to arise are growth of the private
market, affordability issues, updating of flood maps and mitigation. Mr. Sonnichsen said regulators might want to think about
how consumers interact with the write-your-own carriers and experience with the agent and broker community. He said the
Committee may look to see whether there is enough transparency in pricing and coverage, appropriate disclosures to
consumers regarding coverage, and consistent training for the distribution channel and adjusters. He also noted that most of
the private writers have been surplus lines insurers. He said surplus lines insurers have typically covered commercial risks.
The Government Relations (EX) Leadership Council will be the group that will weigh in on these issues, but the Committee
will provide valuable input. Commissioner Ridling asked about the NFIP debt and legislation to deal with that debt. He said
surplus lines writers will likely select the better risks from the program. Mr. Sonnichsen said it is unknown what Congress
will do with the debt. Commissioner Donelon asked about the concerns raised about state insurance regulators’ ability to
regulate surplus lines market and how the federal Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank) might limit that ability. Mr. Sonnichsen noted that nonadmitted insurers are regulated differently and that regulators
should look into how surplus lines might deal with individual consumers. He noted that Dodd-Frank preempts state
regulation in the surplus lines market.
3. Discussed its Next Steps Related to Recommendations Concerning NFIP
Commissioner Miller said the Committee should gather additional information concerning potential reforms to the NFIP. She
said this could be done by hearing from interested parties at the Spring National Meeting. After gathering the necessary
information needed to make informed decisions related to potential recommendations for NFIP reforms, she said the
© 2016 National Association of Insurance Commissioners 1