Members of the Zurich GRR Team had a busy, yet productive, week attending the National Association of Insurance Commissioners (NAIC) summer meeting in Seattle, Washington. GRR Team members engaged with state regulators from across the country on issues such as innovation and technology, Cyber security/privacy protections, climate resiliency and sustainability, solvency, and other issues of importance to our business. Team members met with Commissioners Michael Humphreys (PA), John King (GA), Kathleen Birrane (MD), Scott White (VA), Scott Kipper (NV), and Michael Yaworsky (FL), as well as delegations from Missouri, Connecticut, and Florida.
Below is a recap of some of the major issues discussed over the course of the event.
Innovation, Technology, and Cybersecurity
The Innovation, Cybersecurity & Technology (H) Committee heard initial feedback from stakeholders on the Committee’s recently released draft Model Bulletin on the use of algorithms, predictive models, and Artificial Intelligence (AI) systems by insurers. The proposed Model AI Bulletin is intended to be used by state departments of insurance to remind insurers that decisions impacting consumers that are made or supported by advanced analytical and computational technologies, including AI systems, must comply with all applicable insurance laws and regulations. During the meeting, interested parties raised concerns about the bulletin’s scope, prescriptiveness, and treatment of insurers’ unrelated third-party vendors. The Committee is endeavoring to expose a revised version of the Model Bulletin by the end of September and adopt a final Model Bulletin at the NAIC’s Fall National Meeting. This is a key NAIC priority.
The Big Data and Artificial Intelligence Working Group provided a summary of the results of the Artificial Intelligence/Machine Learning (AI/ML) Homeowners Insurance Survey and how the results compared with the earlier personal auto insurance survey. ZNA participated in the AI/ML Survey for Homeowners. The Working Group also heard a presentation from Deloitte on generative AI and their discussion of regulatory issues and governance recommendations, with a focus on removing bias. There was no discussion of the proposed AI Model Regulatory questions that took front stage at the Spring National Meeting.
The Privacy Protections Working Group met to discuss the continued work on the draft Consumer Privacy Protections Model Law (#674). The Working Group received comments and provided an Updated Work Plan for moving forward with the draft Model. At the request of industry members, the Work Plan has been revised to provide an extension of the timeframe for finalizing the draft, though the duration of that extension has not yet been determined. The next draft version of Model #674 will likely be released in November. This matter remains a key NAIC priority.
Climate Resiliency and Sustainability
Several committees focused on climate change challenges. The Climate and Resiliency Task Force heard presentations from an Arizona State University professor who spoke on the serious and urgent need to address climate change and from Mike Peterson, a CA insurance regulator, on atmospheric streams and the impacts on high intensity rainfall. The Solvency Workstream announced that amendments to the Financial Analysis and Examination Handbooks are being considered to incorporate climate risk. The NAIC membership remains in an information-gathering phase as they work to develop a response to climate-related issues. There is more to come in this space.
The Financial Condition Committee discussed and heard comments on a recently released memo concerning a “Framework for Regulation of Insurer Investments – A Holistic Review”. The Framework proposes seven initiatives aimed at increasing oversight of rating agencies that are “credit rating providers” (CRPs) recognized by the NAIC, shifting the focus of the NAIC’s Securities Valuation Office (SVO) from individual investment credit assessment to portfolio risk analysis, enhancing structured asset modeling capabilities, building a broad policy advisory function at the SVO, and creating a confidential regulator investment working group similar to the current Financial Analysis (E) Working Group. The proposal involves substantial use of external consultants and presumably significant NAIC resources. The proposed Framework appears to be a significant initiative primarily directed at the life insurance industry.
Discussions with state regulators across the country will continue at NAIC’s next meeting in the Fall of 2023.
Learn more about Zurich North America Government & Regulatory Relations’ top priorities here.