U.S. Department of the Treasury

December 2, 2021

Addressing the Protection Gap Through Public-Private Partnerships and Other Mechanisms  

1.  FIO should advocate for increased funding for wildfire mitigation and should encourage the federal government to incentivize enhance building code and defensible space standards in high risk areas.

2. FIO should identify opportunities in the Infrastructure Package to promote mitigation and improved availability and affordability of insurance covering wildfire risk, consistent with IBH Climate Adaption Principles. 

September 9, 2021

Premium Payment Principles

FACI recommends that FIO consider the following definition and principles related to premium payments

June 2, 2021

Availability and Affordability Studies

1. FACI recommends FIO prioritize an update of its 2017 study of auto insurance affordability.
2. FACI recommends FIO study the availability and affordability of residential property insurance.

February 18, 2021

International Market Access

View subcommittee white paper and dissenting member opinion on recommendation for background and additional detail.

1. FIO should advocate for Treasury and the Office of the U.S. Trade Representative to pursue actions to ensure financial services are not exempt from commitments in trade agreements that promote the free flow of data consistent with consumer data privacy and protection. Such trade agreements should prevent unwarranted data localization, recognizing that such commitments do not restrict a government’s right to adopt or maintain measures to protect personal data, personal privacy and the confidentiality of individual records and accounts, provided that such measures are not used to circumvent the data flow and localization commitments.

December 3, 2020

Insurance Response to Future Pandemics and Other Crises

View subcommittee draft for background and additional detail on each recommendation (note: draft contains pre-amendment language and includes proposals not adopted by FACI)

1. FACI recommends that FIO:
   • reiterate the importance of insurance being deemed a business essential service and encourage federal and state regulators to allow for regulatory compliance efficiencies, coordinate, or take similar relief actions during a future pandemic or emergency, while ensuring consumers and investors continue to have timely access to critical services and information; and
   • develop better ways to prepare for future crises and pandemics, both industry and regulators will need to plan to confront these challenges as part of resiliency planning for uninterrupted regulatory oversight and approvals as well as ongoing business operations. 
2. FACI recommends that FIO encourage regulatory agencies and insurers that have not already done so, either voluntarily or for purposes of satisfying regulatory requirements (e.g., ORSA), to develop strategies that address the key organizational challenges a pandemic poses in preparation for a future event.
3. FACI believes it is appropriate that FIO engage various stakeholders to conduct a study of Federal and State regulations relating to the use of e-delivery in the insurance sector. The study should identify and explore existing regulatory barriers limiting insurers’ and customers’ ability to utilize the advantages of technological developments through the use of e-delivery, thereby enabling conduct of business in a manner consistent with today’s consumer expectations, subject to appropriate safeguards against fraud by parties subject to the transaction.
   • The study should summarize statutory and federal regulatory requirements relating to e-delivery for insurance products, identify ways to improve existing laws and regulations, including areas for increased regulatory flexibility and opportunities to harmonize any inconsistent laws and regulations.
   • The FIO should solicit input from regulators, insurers, consumers, and other stakeholders and examine disparities in internet access, often called the “digital divide”, as part of this study.
4. FIO should encourage both Federal and state regulators to permit or, to the extent e-signature is already adopted, enhance the use of e-signature for insurance transactions and regulatory filings where appropriate and applicable. Regulators should be encouraged to review relevant insurance guidance and rules that require a signature to expressly allow that requirement to be satisfied by an e-signature, subject to appropriate safeguards against fraud by parties subject to the transaction.
5. FIO should encourage state regulators that have not already done so to transition to electronic insurance company regulatory filings where appropriate and applicable, subject to appropriate safeguards against fraud by parties subject to the transaction.
6. FIO should encourage state regulators that have not already done so to adopt online/remote training and examination options for producer licensing where possible, subject to appropriate safeguards against fraud by parties subject to the transaction.

International Market Access

View subcommittee draft for background and additional detail on each recommendation (note: draft contains pre-amendment language and includes proposals not adopted by FACI)

1. FIO should advocate for Treasury and other federal departments and agencies with relevant jurisdiction and expertise - including the Office of the U.S. Trade Representative – to ensure the issues the Subcommittee has identified are considered and resolution sought when engaging in trade negotiations and bilateral consultations with foreign jurisdictions.
2. Analysis of which jurisdictions are engaging in the market access and level playing field issues the Subcommittee has identified should be expanded upon and maintained by the U.S. Government. FIO should advocate for the Office of the U.S. Trade Representative to request that the U.S. International Trade Commission undertake this work.
3. Within the framework of international agreements, FIO should advocate for Treasury and the Office of the U.S. Trade Representative to encourage relevant agencies and organizations to strengthen monitoring of international trade agreement implementation and enforcement of violations, including establishment of annual meetings of signatories to review implementation status and adherence to commitments and new approaches for early identification of issues and resolution of disputes.
4. FIO should advocate for policies and standards at the International Association of Insurance Supervisors (IAIS) that prevent disparate supervision of market players operating in a jurisdiction.
5. FIO should advocate for Treasury to pursue policies and standards at the Financial Stability Board (FSB) that prevent disparate supervision of market players operating in a jurisdiction.

September 29, 2020

Long-Term Care Insurance

View subcommittee draft for background and additional detail on each recommendation

1. Identify key issues/metrics that should be part of market monitoring for [LTCI combination and limited LTCI] products.
2. Identify current information about participants, sales, claims, and other data relevant to inform the key issues in these two product markets.
3. If needed, propose any additional data collection for states/NAIC or FIO or others to monitor these markets.
4. Include analysis of these markets in FIO’s annual report.

December 5, 2019

Mitigation

View subcommittee draft for background and additional detail on each recommendation

1. Adopt the full set of recommendations from the National Mitigation Investment Strategy.  Focus on the Investment Strategy’s recommendation to “Demonstrate how mitigation investments reduce risk through effective education.”
2. Focus on the Investment Strategy’s recommendation to “Coordinate investment in mitigation to reduce risk.”
3. Focus on the Investment’s Strategy to “Incorporate mitigation policies and investments into all aspects of governance."
4. [Consider] [f]inancial incentives to implement mitigation measures.
5. Explor[e] the efficacy of innovative industry solutions and products with increased transparency.

Insurance Capital Standard (ICS)

View subcommittee draft for background and additional detail on each recommendation

1. Help to drive forward the work needed to ensure timely execution on the milestones laid out in Abu Dhabi.
2. Continue successful [ICS] engagement model, comprising both:
   • Active and coordinated collaboration across Team USA, with the goal of negotiating the more granular and technical elements necessary to fulfilling the IAIS commitment to a viable approach to Comparability.
   • Frequent and transparent stakeholder engagement, with a view to soliciting feedback on the technical and political milestones that lie ahead on the pathway to Comparability.
3. Execute substantively on the outcome from Abu Dhabi, which FACI believes should include:
   • Integration of Aggregation into all relevant aspects of the ICS work plan during the Monitoring Period.
   • A methodical, objective, and evidence-based clarification of the potential ambiguities inherent in the published IAIS Comparability definition and principles.
   • Continued technical enhancements to the ICS, particularly with a view to aligning the ICS design more closely with U.S. business models and capital management practices.
   • Reinforcement of the IAIS messaging that ICS ratio reporting (i) is non-mandatory and provisional in nature, (ii) must remain strictly confidential and should not be disclosed by individual insurers (even on a voluntary basis), and (iii) should not be used by third parties for assessing insurer financial strength during the Monitoring Period.

September 23, 2019

Insurance Capital Standard (ICS) Engagement Strategy

View subcommittee draft for background and additional detail on each recommendation

1. To ensure a successful outcome [at the IAIS Annual Meeting in November 2019], FACI urges continued strong collaboration between FIO and its NAIC and Federal Reserve negotiating partners within “Team USA”—with the ultimate goal of securing an agreement at the IAIS that lays a credible pathway for international acceptance of the U.S. “Aggregation” approach to insurance group regulatory capital.
2. FACI also sees FIO playing a vital role in helping to support the NAIC’s education, outreach, and advocacy with IAIS members on the “Aggregation” approach – by helping to explain the process, substance, and value proposition of the Aggregation approach being designed by the NAIC.
3. FACI also believes that, contingent on the outcome of the IAIS meeting, FIO and its “Team USA” partners should consider issuing a joint public statement to both re-assert and clarify the U.S. position on:
   • The pathway forward for Aggregation.
   • The structure and design of ICS 2.0.
   • The intended approach to the 5-year Monitoring Period.

Comparability Assessment of U.S. "Aggregation" Approach

View subcommittee draft for background and additional detail on each recommendation

1. FACI urges FIO, along with its “Team USA” partners at the IAIS Executive Committee, to prioritize, as its key focal point within ICS negotiations: advocacy for the U.S. Aggregation approach being developed by NAIC.  As elements of this advocacy, FACI proposes that FIO, along with “Team USA”, should highlight:
   • The significant work achieved by the NAIC’s Group Capital Calculation Working Group since its inception in February 2016, which has conducted multiple consultations, open hearings, and quantitative field testing.
   • The value proposition of an Aggregation style approach in reflecting the primacy of entity-level jurisdictional requirements in how the industry manages capital; and providing greater insight into the legitimate similarities and differences across various local regimes.
   • The importance of jurisdictional flexibility as a key tenet of prudential oversight and tailoring of insurance regulations to local markets and circumstances.
   • The unproven and untested nature of the ICS 2.0, including design issues, concerns about the validity of “best efforts” valuations, and the potential for pro-cyclicality across changing market environments.
2. FACI also recommends that FIO and “Team USA” should urge the IAIS to issue a clear and well-specified communication (at or before its November meeting) that lays out, in tangible and granular detail, the work-plan and approaches underlying Comparability assessments.
3. FACI recommends that the following framework be utilized for determining the comparability of any jurisdiction's group capital assessment regime applicable to internationally active insurance groups (or IAIGs) and incorporated into the IAIS communication referred to above:
   • The primary criterion for assessing the comparability of a group capital assessment regime should be whether it provides a comparable level of policyholder protection and contributes to global financial stability.
   • A comparable group capital assessment regime should include a worldwide group capital calculation capturing risk at the level of the entire group, including the worldwide parent undertaking of the insurance or reinsurance group, which may affect the group's insurance or reinsurance operations and activities.
   • A comparable group capital assessment regime should recognize and value all material liabilities and capital resources in a consistent, objective and reliable manner.
   • The group wide supervisor should have the authority to impose preventive, corrective, or otherwise responsive measures on the basis of the group capital assessment, including requiring, where authorized, capital measures, as a result of the group capital assessment.
   • A comparable group capital assessment must not undermine existing jurisdictional capital requirements.

ICS Monitoring Period

View subcommittee draft for background and additional detail on each recommendation

1. FACI recommends that FIO push for a candid framing and coherent design of the so-called “Monitoring Period” – ideally, with a formal IAIS statement issued at the IAIS Annual Meeting that comprises the following messages:
   • The IAIS plans to execute on a credible, well-specified process for assessing Comparability of “Aggregation” and other alternative approaches.
   • Implementation of ICS 2.0 for IAIGs remains the authority of the respective group-wide supervisors, and as such, the form and timing of final ICS 2.0 implementation are unknown at the beginning of the monitoring period. Local regulators will make the final decision on the form and timing of ICS implementation in their jurisdiction.
   • ICS 2.0 is a work in progress and may be subject to substantial changes before final implementation. The 5-year period starting in 2020 is not, therefore, simply a “phase in” of ICS 2.0 for adoption as a prescribed capital standard in 2025, but rather an opportunity to assess the validity of the standard and address issues with the standard before implementation. Of note, the appropriate recognition of long-term guarantee business in ICS 2.0 remains a key area of ongoing development.
   • Both the form and timing of the final ICS 2.0 implementation are subject to the results of a public consultation process and market impact studies to be conducted during the monitoring period and focused on impacts on financial stability, the macro-economy and consumers.
   • In the context of these uncertainties and concerns, any ICS 2.0 results reported by companies during the Monitoring Period will not be indicative of capital positions and could well misrepresent a company’s financial strength.

Holistic Framework for Systemic Risk Assessment

View subcommittee draft for background and additional detail on each recommendation

1. FACI recommends a continued focus on the following five substantive themes [of the IAIS Holistic Framework]:
   • Promoting a true cross-sectoral activities-based approach, which places insurance within the proper context of financial services more broadly.
   • Ensuring that macro-prudential surveillance does not become a monolithic, overengineered data mining exercise.
   • Ensuring that the IAIS approach does not overtly single out or discriminate against U.S. insurance products, particularly well-established products such as annuities that play an important role in U.S. retirement planning.
   • Deferring to local supervisors as the primary and accountable authorities for systemic risk oversight.
   • The ABA should be implemented based on a principle of proportionality, based on an insurer’s exposure to potential systemically-risky activities.