UNITED STATES

SELF-ASSESSMENT OF OBSERVANCE WITH 

INSURANCE CORE PRINCIPLES

Prepared By Federal Insurance Office (FIO), National Association of 

Insurance Commissioners (NAIC), Federal Reserve Board 

(FRB)

August 2014

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CONTENTS

Introduction ....................................................................................................................................................1

Introductory statement....................................................................................................................................2

Preconditions for Effective Insurance Supervision ........................................................................................5

Detailed Assessment of the ICPs..................................................................................................................11

INTRODUCTION

Jurisdiction: United States of America

Authority(ies): Federal Insurance Office; Board of Governors of the Federal Reserve 

System; and insurance regulators for the 50 states, the District of 

Columbia, and 5 territories

Contact name: U.S. Department of the Treasury, Federal Insurance Office: Michael T.

McRaith, Director of Federal Insurance Office

Board of Governors of the Federal Reserve System: Thomas Sullivan, 

Senior Advisor; Ann Misback, Associate Director

States: Christine Neighbors, Deputy Director, Nebraska Department of 

Insurance

1. This self-assessment questionnaire has been prepared with reference to the Insurance 

Core Principles, Standards, Guidance and Assessment Methodology, which was issued by the 

IAIS on October 1, 2011 and amended in October 2013 (ICP Materials). Please refer to pages 

10 and 14 of the ICP Materials for a description of the assessment methodology. An additional 

country-specific questionnaire, designed to supplement the self-assessment, will be sent in due 

course. 
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INTRODUCTORY STATEMENT

The insurance industry is a significant component of the U.S. economy. Over 900 licensed 

Life/Health (L/H) insurance entities and over 2,700 licensed Property/Casualty (P/C) insurance 

entities operate in the United States, and those figures exclude insurers licensed solely to write 

health insurance as well as other specialized firms such as title insurers. Some insurers based or 

doing business in the United States write a limited number of lines of business, while others are 

comprehensive providers. These insurance firms also vary with respect to scope, with firms 

having different levels of local, regional, national, and/or international business.

In 2013, net written premiums for the L/H sector were approximately $583 billion and net 

written premiums for the P/C sector were approximately $481 billion. As of December 31, 

2013, the L/H sector held approximately $6.0 trillion of total assets (including $2.3 trillion held 

in separate accounts), while the P/C sector held approximately $1.7 trillion of total assets.

1

The regulation of insurance in the United States has a long, established history. The first 

insurance company founded in the United States was established in 1752. Since the midnineteenth century, the insurance sector has been regulated and overseen by a state-based 

regulatory framework—not a federal one. Since the last FSAP process, however, the U.S. 

system of insurance regulation, supervision, and oversight has evolved. Building on the 

established, state-based regulatory framework, the Dodd-Frank Wall Street Reform and

Consumer Protection Act (Dodd-Frank Act or DFA), passed in 2010, created an increased role 

for the federal government in the insurance sector. The U.S. system of insurance regulation now

provides complementary, tiered regulation, supervision, and oversight by state and federal

agencies.

The business of insurance continues to be regulated primarily at the state level in the United 

States. Each state’s legislature enacts insurance laws and empowers agencies within that state 

with the implementation and enforcement of those laws. The National Association of Insurance 

Commissioners (NAIC) is the standard-setting and regulatory support organization created and 

governed by the chief insurance regulators from the 50 states, the District of Columbia, and five 

U.S. territories. Through the NAIC, state insurance regulators establish standards and best 

practices, conduct peer reviews, and coordinate their regulatory oversight. 

A standard legal framework for state insurance regulation has been created over many years 

through the development and adoption of NAIC model laws, regulations, and other NAIC 

requirements, among other inputs. Although model laws require state legislative enactment to 

become effective, a core set of solvency regulation standards are effectively obligatory by 

operation of the NAIC Accreditation Program. The NAIC Accreditation Program was 

established to develop and maintain standards to promote sound insurance company financial 

 

1 These data were collected by FIO from SNL Financial.
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solvency regulation. The NAIC Accreditation Program requires a state insurance department to 

demonstrate that they meet a wide range of legal, financial, functional, and organizational 

standards as determined by a committee of their peers. The NAIC Accreditation Program 

emphasizes: (1) solvency laws and regulations to protect consumers, including risk-based 

capital requirements; (2) financial analysis and examination processes based on priority status of 

insurers; (3) cooperation and information sharing with other state, federal, or foreign regulatory 

officials; (4) action when insurance companies are identified as financially troubled or 

potentially financially troubled; (5) organizational and personnel practices; and (6) processes for 

company licensing and review of proposed changes in control. All fifty states, the District of 

Columbia, and Puerto Rico are currently accredited.

At the federal level, the Board of Governors of the Federal Reserve System (FRB or Federal 

Reserve), the Federal Insurance Office (FIO) within the U.S. Department of the Treasury 

(Treasury), and the Financial Stability Oversight Council (FSOC) are active in the U.S. 

insurance sector.

The Federal Reserve is the primary, consolidated federal regulator of bank holding companies 

(BHCs), savings and loan holding companies (SLHCs), certain foreign banking organizations 

with U.S. operations (FBOs), and nonbank financial companies the FSOC has determined 

should be subject to supervision by the FRB and enhanced prudential standards (nonbank 

financial companies). In some instances, those supervised entities are holding companies of 

insurers. The FRB regulates their operations, activities, and capital to varying degrees, among 

other things.

The FRB’s authority to supervise these entities, including conducting examinations, is provided 

in the Bank Holding Company Act of 1956 (BHC Act), Home Owners’ Loan Act (HOLA), 

International Banking Act, and Dodd-Frank Act, among others. Generally, the objective of FRB 

regulation and supervision of BHCs, SLHCs, and FBOs is to ensure that companies that control 

depository institutions operate in a safe and sound manner and in compliance with banking laws. 

The objective of FRB regulation and supervision of a nonbank financial company is to ensure 

that the company operates in a safe and sound manner and to prevent or mitigate risks to U.S. 

financial stability that could arise from the material financial distress or activities of a nonbank 

financial company. 

FIO was created by the Dodd-Frank Act. See 31 U.S.C. § 313(a). FIO has the authority “to 

monitor all aspects of the insurance industry, including identifying issues or gaps in the 

regulation of insurers that could contribute to a systemic crisis in the insurance industry or the 

United States financial system” and “to monitor the extent to which traditionally underserved 

communities and consumers, minorities . . . and low- and moderate-income persons have access 

to affordable insurance products regarding all lines of insurance, except health insurance.” 31 

U.S.C. § 313(c)(1)(A)-(B). FIO has authorities regarding financial stability through its work on 

and in support of the FSOC (discussed below), and through its representation of the United 

States at the International Association of Insurance Supervisors (IAIS). FIO’s authority also 

extends to prudential aspects of international insurance matters: FIO is authorized “to 
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coordinate Federal efforts and develop Federal policy on prudential aspects of international 

insurance matters, including representing the United States, as appropriate, in the IAIS” and “to 

consult with the States (including State insurance regulators) regarding . . . prudential insurance 

matters of international importance.” 31 U.S.C. §§ 313(c)(1)(E) and (G). 

The FSOC was established by the Dodd-Frank Act and is charged with: (1) identifying risks to 

the financial stability of the United States that could result from the material financial distress or 

failure, or ongoing activities, of large, interconnected bank holding companies or nonbank 

financial companies, or that could arise outside the financial services marketplace; 

(2) promoting market discipline by eliminating expectations that the U.S. government will 

shield shareholders, creditors, and counterparties from losses in the event of failure; and 

(3) responding to emerging threats to the stability of the U.S. financial sector. There are ten 

voting members and five non-voting members of the FSOC. The Chair of the FRB serves as a 

voting member of the FSOC and the Director of FIO serves as a nonvoting member. The FSOC 

also includes an independent member with insurance expertise who is appointed by the 

President and confirmed by the Senate for a six-year term (as a voting member), and a state 

insurance commissioner designated by the state insurance commissioners for a two-year term 

(as a nonvoting member). FSOC may designate nonbank financial companies, including 

insurers or their holding companies, for enhanced prudential oversight and supervision by the 

FRB. The FSOC itself does not directly supervise any insurance company (or other commercial 

entities). 

On the international front, all 50 states, the District of Columbia, and five U.S. territories,

NAIC, FRB, and FIO are members of the IAIS, holding leadership roles and supporting the 

IAIS’s major standard setting initiatives by working with fellow regulators from around the 

world to improve standards of supervision for cross-border insurers, identifying systemic risk in 

the insurance sector, and setting international best practices.

This Self-Evaluation provides a combined response by U.S. federal and state authorities (the 

states through the NAIC, FIO, and the FRB) as to the procedures, processes, and 

implementation aspects of the matters that are the subject of this FSAP. This introduction and 

the overview of the Preconditions for Effective Insurance Supervision are submitted jointly. 

Unless otherwise indicated, each authority has submitted an individual response herein to the 

ICPs and standards. Some ICPs and standards do not apply to all of the authorities; for such 

ICPs and standards, only the applicable authority or authorities have submitted a response. 
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PRECONDITIONS FOR EFFECTIVE INSURANCE SUPERVISION

Sound and sustainable macroeconomic and financial sector policies

The goals of monetary policy are spelled out in the Federal Reserve Act, which specifies that the 

FRB and the Federal Open Market Committee (FOMC) should seek “to promote effectively the 

goals of maximum employment, stable prices, and moderate long-term interest rates.” Stable 

prices in the long run as well as moderate long-term interest rates are preconditions for 

maximum sustainable output growth and employment. When prices are stable and believed 

likely to remain so, the prices of goods, services, materials, and labor are undistorted by 

inflation and serve as clearer signals and guides to the efficient allocation of resources and thus 

contribute to higher standards of living. Moreover, stable prices foster saving and capital 

formation, because when the risk of erosion of asset values resulting from inflation—and the 

need to guard against such losses—are minimized, households are encouraged to save more and 

businesses are encouraged to invest more.

Beyond influencing the level of prices and the level of output in the near term, the FRB can 

contribute to financial stability and better economic performance by acting to contain certain 

financial disruptions and to prevent their spread outside the financial sector. As noted in the 

most recent Monetary Policy Report to the U.S. Congress, the FRB stated:

With the economic recovery continuing, most Committee members judged by the 

time of the December 2013 FOMC meeting that they had seen meaningful, 

sustainable improvement in economic and labor market conditions since the 

beginning of the current asset purchase program, even while recognizing that the 

unemployment rate remained elevated and that inflation was running noticeably 

below the Committee’s 2 percent longer-run objective.

Monetary Policy Report to the U.S. Congress (February 11, 2014), available at 

http://www.federalreserve.gov/monetarypolicy/mpr_20140211_summary.htm.

The U.S. financial market primarily consists of three sectors: (1) insurance; (2) banking; and 

(3) securities. As noted in the Introductory Statement, the insurance sector is primarily 

regulated by the states and the FRB, with FIO having a complementary monitoring and 

international role. The banking sector is regulated at the federal level by the FRB, the Federal 

Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), 

and the National Credit Union Administration. The U.S. financial regulatory structure is a 

system of a variety of federal and state regulators as well as self-regulatory organizations 

(SROs). Financial products or activities are generally regulated according to their function, no 

matter who offers the product or participates in the activity, whether considered in the insurance,

banking, or securities sectors. At the federal level, the securities industry is regulated under a 

combination of self-regulation subject to oversight by the Securities and Exchange Commission 

(SEC). The SEC oversees the securities industry SROs, including securities exchanges, clearing 
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agencies, and the Financial Industry Regulatory Authority, and the securities industry as a 

whole, and is responsible for administering federal securities laws and developing regulations 

for the industry. In addition to these regulatory bodies, the Commodity Futures Trading 

Commission (CFTC) polices the markets for futures, options on futures, and swaps, and works 

to ensure the protection of customer funds, including those held by certain financial institutions 

operating in those markets. In this regard, the CFTC oversees designated contract markets, 

swap execution facilities, derivative clearing organizations, swap data repositories, swap 

dealers, major swap participants, futures commission merchants, commodity pool operators, and 

other intermediaries. 

The U.S. financial regulatory framework was enhanced by the enactment of the Dodd-Frank

Act, the implementation of which included further strengthening of supervision, capital, and 

risk-management standards for financial companies and financial market utilities; procedures 

for periodic supervisory and company-run stress tests; rule-makings related to the orderly 

liquidation authority; regulation of the derivatives markets to reduce risk and increase 

transparency; new standards to protect mortgage borrowers and reduce risks in the mortgage 

market; and other measures to enhance consumer and investor protection. 

A well-developed public infrastructure (including accounting, auditing and actuarial 

standards) 

The United States has a well-documented, well-developed public infrastructure, with authorities

at both the federal and state levels, as well as an efficient and independent judiciary at both the 

state and federal levels.

The United States also has a well-established infrastructure for financial reporting by market 

participants, including insurers. For general-purpose reporting to investors and creditors, U.S. 

firms follow Generally Accepted Accounting Principles (GAAP) as promulgated by the 

Financial Accounting Standards Board (FASB). For firms whose shares are traded on 

exchanges, the SEC provides additional reporting requirements, oversight and enforcement. In 

2002, the Sarbanes-Oxley Act created the Public Company Accounting Oversight Board 

(PCAOB), which establishes auditing and related professional practice standards for registered 

public accounting firms to follow in the preparation and issuance of audit reports. The PCAOB 

has standards in place for auditing, attestation, quality control, ethics, and independence.

Insurance legal entity subsidiaries of insurance holding companies are also subject to additional 

financial reporting requirements by state insurance authorities. Such entities are generally 

required to file detailed annual and quarterly financial statements with supporting schedules and 

disclosures, which are made available to the public. Such financial statements are generally 

prepared on the basis of statutory accounting principles (SAP) as promulgated by the NAIC’s 

Accounting Practices and Procedures Manual (APPM). SAP supports prudential oversight by 

state regulators with a focus on solvency. Insurance entities are also generally required to file
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annual independent audit reports on their SAP-basis financial statements with state insurance 

regulators. 

State insurance regulations require insurers to have an “appointed actuary,” who must meet 

regulatory requirements as a “Qualified Actuary.” To be a Qualified Actuary, the individual 

must meet specific education, experience, and continuing education requirements, as well as 

various conditions established under the NAIC’s Model Actuarial Opinion and Memorandum 

Regulation. The actuary issues an opinion as a public document that is submitted to the state

supervisors, the NAIC, and to the company’s Board of Directors. In addition to the public 

actuarial opinion, the actuary must prepare an Actuarial Memorandum and a Regulatory Asset 

Adequacy Issues Summary (for life insurance) and an Actuarial Report and Summary (for P&C 

insurance). 

Effective market discipline in the financial sector

In the United States, institutions and marketplaces provide platforms for allowing pricing 

mechanisms to allocate scarce resources so willing buyers can be matched with willing sellers 

informed by disclosure regarding financial products. A diversified and large number of U.S.

financial institutions comprise a competitive marketplace. Disclosure of financial information 

by institutions is mandated by rules emanating from prudential regulators such as the SEC, the 

CFTC, and prudential regulators such as the federal banking agencies, and state insurance 

departments. Publicly-traded companies are required under federal securities laws to provide 

annual, quarterly, and periodic disclosures of material information. As noted in the response to 

Precondition (b), insurers have additional requirements to complete regular disclosures to state 

insurance regulators. Forward looking market signals are a key aspect of market discipline 

provided by the financial markets. In addition, the proper pricing of default risk, typically 

through credit default swaps and other market based products, is now an essential component of 

market discipline. 

In the insurance sector, state insurance regulators took steps to implement the advice of the 

Financial Stability Board related to reduction of the mechanistic reliance on credit rating agency 

ratings by engaging two risk modeling firms to assist with evaluation of the mortgage-backed 

securities (MBS) held by insurers. To ensure further market discipline, insurers writing business 

in the United States must submit each MBS for a regulatory designation that feeds into the U.S. 

Risk-Based Capital (RBC) evaluation framework. This approach penalizes the insurer for 

holding more risky assets. In addition, the NAIC Securities Valuation Office (SVO) performs 

credit analysis on issues not rated by the credit rating agencies (e.g., private placements) and 

assigns designations for regulatory use. 

Mechanisms for providing an appropriate level of systemic protection (or public safety 

net)

As noted in the response to Precondition (a), the Dodd-Frank Act includes a number of 

provisions to strengthen the financial stability of the United States. Among these measures is 
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the FSOC, which is chaired by the Secretary of the Treasury, and consists of 10 voting members 

and 5 nonvoting members. The FSOC brings together the expertise of federal financial 

regulators, state financial regulators, and an independent insurance expert appointed by the 

President. The FSOC is charged with identifying risks to the financial stability of the United 

States, promoting market discipline, and responding to emerging risks to the stability of the 

financial system of the United States. The Dodd-Frank Act also authorizes the FSOC to 

designate systemically important nonbank financial companies, including insurers, for enhanced 

prudential standards and supervision by the FRB. The FSOC is also authorized to designate 

systemically important financial market utilities (FMUs). To support the activities of the FSOC 

and its member agencies, the Dodd-Frank Act also created the Office of Financial Research 

(OFR), within Treasury, to collect and improve the quality of financial data and develop tools to 

evaluate risks to the financial system. The Dodd-Frank Act requires the FSOC to report 

annually to Congress. These reports are collectively drafted by FSOC members, and highlight

significant financial market and regulatory developments and an assessment of the impact of 

those developments on the stability of the financial system, along with potential emerging 

threats to the financial stability of the United States. In addition, the reports provide 

recommendations to enhance the integrity, efficiency, competitiveness, and stability of U.S.

financial markets; promote market discipline; and maintain investor confidence. 

Any member of the FSOC may recommend to the FSOC that it designate an insurer, including 

the affiliates of such insurer, as a nonbank financial company subject to supervision by the FRB

and enhanced prudential standards. Nonbank financial companies designated by the FSOC are 

assigned to the Large Institution Supervision Coordinating Committee (LISCC) portfolio within 

the FRB’s Division of Banking Supervision and Regulation. The LISCC is a Federal Reserve 

System-wide committee, chaired by the director of the FRB’s Division of Banking Supervision 

and Regulation, which is tasked with overseeing the supervision of the largest, most 

systemically important financial institutions in the United States. In addition, under section 165 

of Dodd-Frank Act, the FRB is directed to establish enhanced prudential standards for BHCs 

and FBOs with more than $50 billion in total assets and for nonbank financial companies, 

including those engaged in insurance activities, with respect to liquidity, risk management, and 

capital. These standards are required to be more stringent than those standards applicable to 

other BHCs and nonbank financial companies that do not present similar risks to U.S. financial 

stability and must increase in stringency based on several factors, including the size and risk 

characteristics of a company subject to FRB regulations. 

Title II of the Dodd-Frank Act provides additional systemic protection through the procedures 

for orderly liquidation authority set out therein. Under Title II, for an insurer or a holding 

company for which the largest subsidiary is an insurer, the Secretary of the Treasury (in 

consultation with the President) may, following a recommendation by the Director of FIO and 

the FRB made in consultation with the FDIC, make a systemic risk determination, pursuant to 

statutorily prescribed criteria, to place such company into receivership. Title II provides that the 

liquidation of an insurer shall be conducted under applicable state law. If the appropriate state 
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regulator does not act within sixty days to begin orderly liquidation proceedings for the insurer, 

the FDIC has the authority to “stand in the place of the appropriate regulatory agency and file 

the appropriate judicial action in the appropriate State court to place such company into orderly 

liquidation under the laws and requirements of the State.”

At the state level, guaranty funds have been established by each state to provide a safety net for 

policyholders and other claimants and beneficiaries of insurance coverage. Guaranty fund 

protection is triggered by a judicial finding of an insurance entity’s insolvency, and serves to 

indemnify, up to the limits allowed by state law, policyholders and other claimants and 

beneficiaries of insurance coverage. Most personal lines insurance products are subject to some 

guaranty fund protection, the terms of which vary by state; however, some insurance lines, such 

as residential mortgage and credit insurance written by monoline insurers, are not subject to 

guaranty fund protection.

Efficient financial markets. 

The United States has efficient, deep, liquid, and transparent financial markets. These markets 

include the New York Stock Exchange, NASDAQ, and futures exchanges, among others. These 

exchanges support the world’s largest economy with significant capitalizations. The United 

States has a very reliable, effective, efficient, and fair legal and judicial system, where 

judgments are enforced. 

The United States also maintains high standards for financial reporting activities, including

actuarial and auditing activities. Publicly-traded U.S. corporations file extensive disclosures 

with the SEC. The SEC requires public companies to disclose a significant level of financial 

and other information to the public. This provides a common information source available for 

all investors to use to judge whether to buy, sell, or hold a particular security. The result of this 

information flow is an active, efficient, and transparent capital market that facilitates capital 

formation and economic development.

The insurance sector is an essential participant in the U.S. financial markets. The Introductory 

Statement lays out metrics showing the magnitude of the U.S. insurance sector. U.S. insurers 

offer a full range of insurance products in the L/H sector and the P/C sector. Information on 

U.S. insurers is available through SEC filings (for publicly held insurers) and through additional 

financial filings made with state insurance authorities.
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Summary of Observance of the Insurance Core Principles—ROSCs

Insurance Core Principle (ICP) Level

ICP1 - Objectives, Powers and Responsibilities of the Supervisor O

ICP2 - Supervisor O

ICP3 - Information Exchange and Confidentiality Requirements O

ICP4 - Licensing O

ICP5 - Suitability of Persons O

ICP6 - Changes in Control and Portfolio Transfers O

ICP7 - Corporate Governance O

ICP8 - Risk Management and Internal Controls O

ICP9 - Supervisory Review and Reporting O

ICP10 - Preventive and Corrective Measures O

ICP11 - Enforcement O

ICP12 - Winding-up and Exit from the Market O

ICP13 - Reinsurance and Other Forms of Risk Transfer O

ICP14 - Valuation LO

ICP15 - Investment O

ICP16 - Enterprise Risk Management for Solvency Purposes LO

ICP17 - Capital Adequacy LO

2

ICP18 - Intermediaries O

ICP19 - Conduct of Business O

ICP20 - Public Disclosure O

ICP21 - Countering Fraud in Insurance O

ICP22 - Anti-Money Laundering and Combating the Financing of Terrorism O

ICP23 - Group-wide Supervision LO

ICP24 - Macroprudential Surveillance and Insurance Supervision O

ICP25 - Supervisory Cooperation and Coordination O

 

2 The self-assessment team notes that the FRB’s rule-making process is not finalized. 
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ICP26 - Cross-border Cooperation and Coordination on Crisis Management O

Aggregate Level: Observed (O), largely observed (LO), partly observed (PO), not observed 

(NO), not applicable (N/A).

DETAILED ASSESSMENT OF THE ICPS

ICP/Std. Description

ICP 1 Objectives, Powers and Responsibilities of the Supervisor

1 The authority (or authorities) responsible for insurance supervision and 

the objectives of insurance supervision are clearly defined.

1 The U.S. system of insurance regulation provides complementary, tiered 

regulation, supervision, and oversight by state and federal agencies.

FIO: As set forth in Title V of the Dodd-Frank Act (which enacts the Federal 

Insurance Office Act of 2010), “there is established within the Department of 

the Treasury the Federal Insurance Office.” 31 U.S.C. § 313(a). FIO’s 

authorities and objectives are clearly set out in Title V of the Dodd-Frank Act. 

Pursuant to Title V, FIO is authorized: (1) to monitor all aspects of the 

insurance industry, including identifying issues or gaps in the regulation of 

insurers that could contribute to a systemic crisis in the insurance industry or 

the U.S. financial system; (2) to monitor the extent to which traditionally 

underserved communities and consumers, minorities, and low- and moderateincome persons have access to affordable insurance products regarding all 

lines of insurance, except health insurance; (3) to recommend to the FSOC 

that it designate an insurer, including the affiliates of such insurer, as an entity 

subject to regulation as a nonbank financial company supervised by the FRB; 

(4) to assist the Secretary of the Treasury in administering the Terrorism Risk 

Insurance Program established in the Department of the Treasury under the 

Terrorism Risk Insurance Act of 2002; (5) to coordinate federal efforts and 

develop federal policy on prudential aspects of international insurance 

matters, including representing the United States, as appropriate, in the IAIS 

(or a successor entity) and assisting the Secretary in negotiating covered 

agreements; (6) to determine (in accordance with Title V) whether state 

insurance measures are preempted by covered agreements; (7) to consult with 

the states (including state insurance regulators) regarding insurance matters of 

national importance and prudential insurance matters of international 

importance; and (8) to perform such other related duties and authorities as 

may be assigned to FIO by the Secretary. See 31 U.S.C. § 313(c)(1). 

Title II of the Dodd-Frank Act authorizes FIO and the FRB (in consultation 
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ICP/Std. Description

with the FDIC) to recommend that the Secretary of the Treasury (in 

consultation with the President) make a systemic risk determination, pursuant 

to statutorily prescribed criteria, to place an insurer or a holding company for 

which the largest U.S. subsidiary is an insurer into receivership. See 12 

U.S.C. § 5383(a)(1)(C). 

FRB: As noted in the introduction, the FRB is the consolidated supervisor of 

BHCs, SLHCs, FBOs, and nonbank financial companies and conducts 

prudential regulation and supervision of such entities. The FRB’s authority to 

supervise these entities, including conducting examinations, is provided in the 

BHC Act, HOLA, International Banking Act, and Dodd-Frank Act, 

respectively. 

The objective of FRB regulation and supervision of BHCs, SLHCs, and FBOs 

is to ensure that the entities operate in a safe and sound manner and in 

compliance with banking laws. The objective of FRB regulation and 

supervision of nonbank financial companies engaged in the business of 

insurance is to reduce the threat the insurer may pose to the financial stability 

of the United States. 

Consistent with U.S. legal and regulatory framework, the FRB works closely 

with other relevant state and federal regulators, including through appropriate 

consultation, and relies to the fullest extent possible on the examinations and 

other reports made by other federal and state regulators relating to supervised 

entities. For example, for insurers, the FRB relies significantly on legal entity 

examinations conducted by state insurance regulators. 

Certain BHCs, SLHCs, state member banks, FBOs, and nonbank financial 

companies directly engage in insurance activities or are affiliated with 

insurance companies or agencies through subsidiary arrangements. The FRB 

does not directly regulate the insurance activities of its supervised entities. 

The primary supervisors of the insurance activities are the individual states in 

which the insurance companies are organized and operate. In carrying out its 

supervisory activities, the FRB routinely communicates and coordinates 

supervision with state insurance regulators, including those responsible for 

licensing, regulating, and supervising the insurance subsidiaries of the BHCs, 

SLHCs, state member banks, FBOs, and nonbank financial companies.

States: Each U.S. state, district, and territory has established an executive 

branch department or division dedicated to the regulation of insurance.

3

 

3

“Regulate” and “supervise” are used interchangeably throughout this document. 
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ICP/Std. Description

Laws enacted by the legislatures in each jurisdiction define the authority of 

the insurance regulator and govern the conduct of the insurance industry

within that jurisdiction.

4

These comprehensive state insurance codes 

provide the requirements to do business in a state (whether as a

domestic, foreign or alien insurer), financial solvency standards, licensing 

and conduct standards for insurance producers, and market conduct 

requirements. Laws are supplemented by administrative regulations 

developed pursuant to legislative authorization, department guidance issued 

through bulletins and circular letters, and administrative 

procedures. The insurance regulator is charged with enforcing those laws and 

generally supervising the conduct of the business of insurance within the 

jurisdiction.

Generally, state insurance departments are organized around two important 

interrelated central areas of regulation: financial regulation and market

regulation. Financial regulation encompasses licensing of companies, 

reporting and financial analysis, insurance holding company and group 

supervision, capital and surplus requirements, examinations of companies, 

regulation of reserves and investments, and insolvencies. Market regulation

focuses on prevention of unfair trade practices (including unfair claims

settlement practices), analysis and approval of policy rates and forms,

producer licensing, prevention of unlicensed insurance activities, antifraud 

efforts, and consumer complaints and assistance.

The NAIC’s Accreditation Program verifies that each state has the necessary 

laws in place to properly and appropriately regulate the financial solvency of 

its domestic multistate insurers that do business across state borders. In order 

to be accredited, a state must have in place various requirements via statute, 

regulation or administrative practice to provide it with adequate power to 

regulate its domestic and multistate insurers for financial solvency. These 

requirements relate to 19 topical areas determined by insurance regulators to 

provide the bulwark for sound financial regulation. 

The U.S. insurance supervisory framework is designed to meet two principal 

objectives: the protection of the insurance consumer and the maintenance of 

solvent insurance companies. The primary function of insurance regulation is 

to promote stable insurance markets, thereby protecting the public by ensuring 

 

4

For purposes of the state regulators’ response, regulator, insurance regulator, state regulator, state insurance regulator, 

supervisor, insurance supervisor, commissioner, insurance commissioner, state insurance commissioner, insurance department, 

state insurance department are used interchangeably throughout the document.
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fair contracts at fairly administered prices from financially strong companies.

1.1 Primary legislation clearly defines the authority (or authorities) 

responsible for insurance supervision.

1.1 FIO: As set forth in FIO’s response to ICP 1, the Dodd-Frank Act establishes 

the authorities of FIO.

FRB: The FRB is the top-tier supervisor of the consolidated operations of all 

BHCs and SLHCs. See 12 U.S.C. § 1841, et seq., and 12 U.S.C. § 1467a. The 

FRB is also the top-tier supervisor of the consolidated operations of nonbank 

financial companies. See 12 U.S.C. § 5333. Congress has made clear that 

direct supervision of the insurance activities of BHCs, SLHCs, and nonbank 

financial companies occurs at the state level in the jurisdictions in which the 

activities are conducted. See 15 U.S.C. § § 1012, et seq. (McCarran-Ferguson 

Act); see also 12 U.S.C. § 1844(g)(1)(B).

States: Through legislation enacted by state legislatures, the state insurance 

departments have legal authority, enforcement powers, legal framework and 

financial resources to exercise their functions and powers. Each state has the 

power to supervise any individual or entity that is transacting insurance 

business as defined by the law, including insurers, reinsurers, captives, health 

maintenance organizations, and insurance intermediaries. The 

comprehensive legal and regulatory framework set forth in state statutes 

gives each state the power to issue and enforce rules and other 

regulations and regulatory tools by administrative means, take the 

appropriate actions as and when required, and discharge its supervisory 

responsibilities effectively. See ICP 1 for additional information.

1.2 Primary legislation clearly defines the objectives of insurance supervision 

and the mandate and responsibilities of the supervisor and gives the 

supervisor adequate powers to conduct insurance supervision, including 

powers to issue and enforce rules by administrative means and take 

immediate action.

1.2 FIO: The response to ICP 1 sets forth the objectives that Titles I, II and V of

the Dodd-Frank Act establish for FIO. In carrying out its functions, FIO is 

authorized to “receive and collect data and information on and from the 

insurance industry and insurers; enter into information-sharing agreements; 

analyze and disseminate data and information; and issue reports regarding all 

lines of insurance, except health insurance.” 31 U.S.C. § 313(c)(1)(b). FIO 
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“may require an insurer, or any affiliate of an insurer, to submit such data or 

information as the Office may reasonably require in carrying out the 

functions,” provided that FIO first “coordinate with each relevant Federal 

agency and State insurance regulator (or other relevant Federal or State 

regulatory agency, if any, in the case of an affiliate of an insurer) and any 

publicly available sources to determine if the information to be collected is 

available from, and may be obtained in a timely manner by, such Federal 

agency or State insurance regulator, individually or collectively, other 

regulatory agency, or publicly available sources.” 31 U.S.C. § § 313(e)(2), 

(4). The Director of FIO has the power under Title V of the Dodd-Frank Act 

to require by subpoena the production of data or information from insurers 

and affiliates, “but only upon a written finding by the Director that such data 

or information is required to carry out [FIO’s statutory] functions . . . and that 

the Office has coordinated with [relevant federal agencies, state insurance 

regulator or other regulatory agencies, individually or collectively, to 

determine if the information to be collected is available from, and may be 

obtained in a timely manner from the agencies, regulators or publicly 

available sources].” 31 U.S.C. § 313(e)(6). 

FRB: The FRB’s supervision of banking organizations, including those 

engaged directly or indirectly in insurance activities, is focused on 

consolidated risk exposures, financial strength, capital adequacy, and 

liquidity. One of the primary goals of the FRB’s consolidated supervision of 

banking organizations is to protect the depository institution (DI) subsidiaries 

from potential risks posed by the holding company and other affiliates. The 

scope of consolidated supervision for nonbank financial companies is focused 

on enhancing the resiliency of the firm to lower the probability of its failure or 

inability to serve as a financial intermediary reducing the impact that the 

firm’s failure or material weakness could have on the financial stability of the 

United States. The primary supervisor of the insurance activities of BHCs, 

SLHCs, state member banks, FBOs, and nonbank financial companies are the 

states in which the activities are conducted.

The FRB has authority pursuant to the BHC Act and HOLA to take 

enforcement actions against a BHC or SLHC, respectively. See 12 U.S.C. § 

1842(c)(3), 12 U.S.C. §§ 1844(e) and (f), and 12 U.S.C. §§ 1467a(e) and (g). 

The FRB may take enforcement action against a nonbank financial company 

and its subsidiaries pursuant to the Dodd-Frank Act. 12 U.S.C. § 5362.

States: Laws enacted by the legislatures in each jurisdiction govern the 

conduct of the insurance industry within that jurisdiction. Primary legislation 

defines the objective of the departments to ensure the continued solvency, 

safety and soundness of insurers and to ensure fair, timely and equitable 

fulfillment of the financial obligations of insurers. State statutes 
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are supplemented by administrative rule-making authority, allowing state 

insurance regulators to apply their expertise in implementing legislativelygranted powers. Through rule-making, state insurance regulators can issue 

and revise legally binding rules enforceable by administrative and judicial 

means. Taken together, statutes and administrative regulations allow for 

comprehensive regulation of all aspects of insurance business.

1.3 The principal objectives of supervision promote the maintenance of a 

fair, safe and stable insurance sector for the benefit and protection of 

policyholders.

1.3 FIO: While FIO does not have general supervisory or regulatory authority, it 

does have specific statutory authority complementary to the roles of the FRB 

and the states. In addition to supporting work that promotes national financial 

stability by serving on and supporting the work of the FSOC, FIO has the 

authority “to monitor all aspects of the insurance industry, including 

identifying issues or gaps in the regulation of insurers that could contribute to 

a systemic crisis in the insurance industry or the United States financial 

system.” 31 U.S.C. § § 313(c)(1)(A). FIO’s financial stability role is further 

clarified through its authority to represent the United States at the IAIS; the 

IAIS mission is “to promote effective and globally consistent supervision of 

the insurance industry in order to develop and maintain fair, safe and stable 

insurance markets for the benefit and protection of policyholders and to 

contribute to global financial stability.” FIO also has the authority to “assist[] 

the Secretary in negotiating covered agreements” and “to determine . . . 

whether State insurance measures are pre-empted by covered agreements.” 

31 U.S.C. § 313(c)(1)(E), (F). Covered agreements are discussed further in 

FIO’s response to ICP 13. 

FIO is also authorized “to monitor the extent to which traditionally 

underserved communities and consumers, minorities . . . and low- and 

moderate-income persons have access to affordable insurance products 

regarding all lines of insurance, except health insurance.” 31 U.S.C. § 

313(c)(1)(B). FIO publishes annual and special reports addressing this 

information. For example, in December 2013, FIO released a report titled 

How to Modernize and Improve the System of Insurance Regulation in the 

United States (“Modernization Report”). FIO also publishes annual reports 

regarding the state of the insurance industry, including national and 

international regulatory developments and issues of concern. 

FRB: The objective of FRB regulation and supervision of BHCs, SLHCs, 

and FBOs is to ensure that companies that control depository institutions 
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operate in a safe and sound manner and in compliance with banking laws. 

This includes an assessment of the organization’s risk-management systems, 

financial condition, and compliance with applicable banking laws and 

regulations. The primary objectives of the FRB’s supervision of nonbank 

financial companies are two-fold: 

1. To enhance resiliency of a firm to lower the probability of its failure or 

inability to serve as a financial intermediary, and

2. To reduce the impact on the financial system and the broader economy 

in the event of a firm’s failure or material weakness. 

The primary supervision of insurance activities occurs at the state level. 

States: The state insurance regulatory framework is designed to meet two 

principal objectives: the protection of the insurance consumer and the

maintenance of solvent insurance companies. The primary function of 

insurance regulation is to promote stable insurance markets, thereby 

protecting the public by ensuring fair contracts at fairly administered prices 

from financially strong companies.

1.4 Where, in the fulfilment of its objectives, the supervisor identifies 

conflicts between legislation and supervisory objectives, the supervisor 

initiates or proposes correction in legislation.

1.4 FIO: For the first time, the United States has a federal office explicitly 

authorized to monitor the insurance sector and its regulations, with particular 

authorities to identify areas appropriate for improved regulatory treatment. 

Pursuant to its authorities, FIO has identified conflicts between legislation 

and supervisory objectives, as detailed in the Modernization Report and 

FIO’s annual reports. In the Modernization Report, FIO has recommended 

adoption of certain legislation at the state and federal levels. For example, to 

reform an aspect of the state regulatory system, FIO has recommended that 

Congress pass the National Association of Registered Agents and Brokers 

Reform Act of 2013. Another example relates to laws to be adopted by state 

legislatures: FIO has publicly called for revised state standards, regulations, 

and/or laws in several areas, including reinsurance captives and special 

purpose vehicles. 

FRB: The FRB’s supervision of BHCs, SLHCs, nonbank financial 

companies, and other regulated entities is based upon federal statutes. The 

FRB does not believe there are any material conflicts between the fulfillment 

of its objectives and any current legislation. The FRB has a number of ways 
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to communicate to the U.S. Congress. FRB members and staff often provide 

testimony to select committees and subcommittees of the U.S. Congress on a 

number of relevant issues, including in response to questions relating to 

proposed legislation or amendments to existing legislation. Speeches to the 

public and other public fora provide other avenues of communication.

States: If there are any legislative changes needed to ensure that supervisory 

objectives can be achieved, state insurance regulators can make specific 

proposals for changes, including proposed amendments to legislation to 

address such concerns. Either independently or in consultation with other 

executive branch officials, state insurance regulators promote legislation 

designed to correct potential conflicts and address new and emerging issues.

ICP 2 Supervisor

2 The supervisor, in the exercise of its functions and powers: 

 is operationally independent, accountable and transparent; 

 protects confidential information; 

 has appropriate legal protection; 

 has adequate resources; 

 meets high professional standards.

2 States: The state insurance departments, and more specifically the 

commissioner and their offices, are granted authority under state statutes by 

their state legislative body(ies) to take various actions which collectively 

implement the function and powers of state insurance departments. The 

state insurance department is independent from the state’s legislative body. 

The commissioner is either elected by the general population, appointed by 

the state governor, or overseen by an intermediate regulatory commission. 

The commissioner may serve for a fixed term of office or at the pleasure of 

the governor or appointing body. The commissioner is generally the only 

employee within the state insurance department whose position is either 

elected or appointed.

Although sources of funding vary among the states, the most common 

method used by insurance departments is a “dedicated funding system” 

whereby specific amounts are placed in a separate fund established for the 
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insurance department through the state budgetary process. A “quasidedicated” funding system is similar, except that the balance at the end of the 

year returns to the state’s general fund, rather than being carried over to the 

next fiscal year. In a “general revenue” funding system, all revenue generated 

by the state insurance department is placed into the state’s general fund. The 

state legislature then allocates an amount to the insurance department in the 

normal budgetary process.

The comprehensive legal and regulatory framework as set forth in statutes, 

regulations and other regulatory tools gives each state the power to gather 

and protect confidential information. For example, all states have adopted 

the NAIC Model Law on Examinations (Model #390), which sets forth these 

powers as they pertain to most of the financial information that is obtained by 

states in their function of monitoring the financial condition of insurers. The 

NAIC Accreditation Program also requires that the state insurance 

department have the regulatory authority to maintain the confidentiality of 

the information received from these other parties. In this regard, state 

insurance departments are required to have a documented policy to cooperate 

and share confidential information with officials of any state, federal agency 

or foreign country and the NAIC, as long as the other party has the authority 

and agrees to maintain the confidentiality of the information. Further

information regarding the protection of confidential information is provided 

under responses related to ICP 3.

As verified under the NAIC Accreditation Program, each state must make an 

appropriate allocation of its available resources to effectively address its 

regulatory priorities. This requires each state to hire, train and maintain 

sufficient staff with high professional standards. This also requires each state 

to consider the need to hire external specialists for oversight of more complex 

insurers or areas. Part C of the NAIC Accreditation Program specifically 

addresses the issue of financial and human resources. The three standards in 

this area address professional development, minimum educational and 

experience requirements, and the ability to attract and retain qualified 

personnel.

FRB: Independence – The FRB is composed of seven governors who are 

appointed by the President and confirmed by the U.S. Senate. The Chair of 

the FRB serves a four-year term, as does the governor designated to serve as

Vice Chairman. The full term of a Governor is 14 years; appointments are 

staggered so that one term expires on January 31 of each even-numbered 

year. The positions are non-partisan, and there is no expectation that a

Governor will resign at the conclusion of the term of the President who 

appointed them. In addition, the FRB is self-funded and, thus, is not subject to 
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the congressional budget process or congressional appropriations. 

Accountability – Members of the FRB can be removed for cause by the 

President. See 12 U.S.C. § 242. The FRB’s response to ICP/Std. 2.1 contains 

additional information on accountability related to regular audits of the FRB 

and the Reserve Banks.

Transparency – The FRB complies with the Government Performance and 

Results Act of 1993, which requires federal agencies, in consultation with 

Congress and outside stakeholders, to prepare a strategic plan covering a

multiyear period and to submit an annual performance plan and performance

report. See 5 U.S.C. § 306 and 31 U.S.C. § 1115. The performance plans

and assessments are incorporated into the FRB’s annual report, which is

required to be made public. The FRB also is required, by separate statute, to

report annually on regulatory and supervisory actions taken during the year.

Together, these requirements provide tangible and transparent measures of

agency performance against statutory and stated performance targets.

Protection of confidential information – Unless authorized by law, it is a

crime for an employee of the U.S. federal government to divulge, disclose, or

make known in any manner trade secrets or other confidential business

information collected in the course of employment or official duties. See 18 

U.S.C. § 1905. The FRB has detailed, clear rules regarding the availability of 

information and treatment of confidential information. See 12 CFR Part 261. 

These rules set forth the categories of information made available to the 

public, the procedures for obtaining documents and records, the procedures 

for limited release of exempt and confidential supervisory information, and 

the procedures for protecting confidential business information. In addition, 

the FRB has numerous, public supervisory policy letters (available on the 

FRB’s website) concerning treatment of confidential and sensitive 

information, among other topics related to information handled by the FRB 

and its staff.

Appropriate legal protection – The FRB and its staff are generally protected 

against lawsuits for actions and omissions made while discharging their duties 

in good faith. Sovereign immunity bars lawsuits without specific statutory 

authorization to pursue such litigation. Common law qualified immunity 

protects federal banking agencies’ leadership and staff from liability for the 

violation of an individual’s federal Constitutional rights in connection with 

employees’ performance of discretionary functions, as long as the employees’ 

conduct does not clearly violate established statutory or Constitutional rights. 

More detail is provided in the FRB’s response to ICP/Std. 2.10.
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Adequate resources – The FRB is self-funded and has adequate resources to 

carry out its objectives.

Professionalism – The FRB insists that all staff members maintain high

professional standards and exhibit high integrity. Federal laws and

regulations, as well as the FRB’s conflict-of-interest rules and codes of

conduct of, help to ensure that these standards are met. For example, FRB and 

its staff are subject to statutory restrictions on activities and affiliations that

might raise conflicts of interests. See, e.g., 12 U.S.C. §§ 242 and 244

(prohibiting Federal Reserve members from holding office in or stock of a

member bank).

Senior examination staff members of the FRB generally are subject to a oneyear post-employment “cooling off” period with respect to entities they

supervised. Violators are subject to civil monetary penalties, can be removed 

from office, and can be prohibited from participating in the affairs of the

depository institution, holding company, or any other company for up to five

years. Examiners also are prohibited from accepting loans or gratuities from

banks that they examine. See 18 USC § 213. These standards are 

reinforced by a number of criminal statutes, including those prohibiting

corruption, bribery, theft, and fraud by agency employees. These laws are

actively enforced.

The FRB maintains administrative policies to ensure that appropriate codes of 

conduct are being followed. The policies outline the requirements for 

examiners and other supervisory staff concerning investment prohibitions, 

borrowing prohibitions, and recusal requirements based on considerations 

such as family, debt, or prior employment relationships. See Federal Reserve 

(Federal Reserve Administrative Manual, sections 5-041 and 5-035). 

The FRB has requirements related to the initial appointment of an examiner 

and promotion to commissioned examiner. In general, the guidance specifies 

standard information required for initial examiner appointments, such as 

professional qualifications, citizenship, and potential conflicts with depository 

institutions, their holding companies, or other affiliates (i.e., the prospective 

employee’s completed conflicts of interest form), and outlines general 

requirements to be considered for appointment of an assistant examiner to 

commissioned examiners status, including proficiency tests that must be 

completed as well as practical supervisory work. The rigorous commissioning 

process for examiners promotes high standards of performance. See Federal 

Reserve Administrative Manual, section 5-040.

FIO: Regarding independence, accountability, and transparency, as an office 

within the Treasury, FIO and its staff are bound by federal laws and 
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regulations regarding the independence of decisions from external influences, 

including federal conflict of interest statutes, the Executive Branch Standards 

of Conduct, and Treasury’s supplemental ethics regulations. In addition, FIO 

and its work are subject to the review of the U.S. Department of the Treasury 

Officer of the Inspector General; the General Accountability Office; and 

members and committees of Congress. FIO’s work often occurs in a public 

forum or is disclosed to the public through various methods. The FSOC has 

adopted a transparency policy and promulgated regulations which govern its 

work, e.g. 12 CFR Part 1301 and 12 CFR Part 1310, and FIO’s work on the 

FSOC is subject to these policies and procedures. FIO further informs the 

public of its work through notices published in the Federal Register, in its 

annual reports and special reports, through its advisory committee, and 

through direct engagement with stakeholders, and in public engagement, 

including through speeches and Congressional testimony. 

Regarding confidentiality, federal law, including Title V of the Dodd-Frank 

Act and the Federal Information Security Management Act (FISMA), affords 

protection of confidential information collected or otherwise obtained by FIO. 

Further, it is against federal law for FIO’s staff members to divulge or disclose 

confidential business information collected in the course of employment or 

official duties. See 18 U.S.C. § 1905. FIO is also governed by various 

Treasury policies and procedures that afford protection of confidential 

information collected or otherwise obtained by FIO. See, e.g., Treasury 

Security Manual – TD P 15-71.

Regarding legal protection, FIO and its staff are protected by the sovereign 

immunity of the U.S. government against lawsuits for actions taken in good 

faith while discharging duties.

Regarding resources, FIO has adequate resources to attract and retain skilled 

and experienced staff. As an office within Treasury, FIO’s staff members 

have the opportunity to receive training on a variety of subjects.

Regarding professional standards, as an office of Treasury, FIO and its staff 

are held to high standards of integrity and professionalism, and are subject to 

the Standards of Ethical Conduct for Employees of the Executive Branch.

2.1 The governance structure of the supervisor is clearly defined. Internal 

governance procedures, including internal audit arrangements, are in 

place to ensure the integrity of supervisory actions. There is effective 

communication and prompt escalation of significant issues to appropriate 

levels within the supervisor. The decision-making lines of the supervisor 

are structured in such a way that action can be taken immediately in the 
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case of an emergency.

2.1 States: Official actions of the insurance department typically occur in the 

name of the insurance commissioner, who is vested with the authority and 

oversight of the insurance department. Insurance departments are divided into 

sections with responsibility for direct regulation of certain areas (e.g., 

financial surveillance, rates and forms, producer licensing). The section heads 

report to the commissioner or deputy commissioner. Organizational charts 

define internal reporting and areas of responsibility. When combined 

with authority granted by law and regulation, subject matter experts can 

address issues while escalating matters internally that may require the 

attention of the section head and/or action of the commissioner. The NAIC 

Accreditation Program provides for a review of an insurance department’s 

policies and procedures regarding regulatory actions and the timeliness and 

appropriateness of action taken by a department’s chain of command.

Most states have a state auditor’s office which reviews the functions and 

procedures of state agencies, including the state’s insurance department.

FRB: The FRB is composed of up to seven governors, who are appointed by 

the President and confirmed by the U.S. Senate. The FRB appoints the 

directors of each of 14 divisions who supervise and coordinate the staff and 

activities of their respective divisions. Staff members meet regularly with 

each of the Governors. When appropriate, significant supervisory issues can 

be escalated promptly to appropriate levels. As evidenced during the financial 

crisis when the FRB took swift steps to address various financial system 

problems, supervisory decision-making lines within the FRB are structured in 

such a way that action can be taken immediately in the case of an emergency.

The FRB is audited annually by a major public accounting firm. The 

Government Accountability Office (GAO) also generally exercises its 

authority to conduct a number of reviews each year to look at specific aspects 

of the FRB’s activities. The audit report of the public accounting firm and a 

complete list of GAO reviews under way are available in the FRB’s Annual 

Report. Finally, the FRB contracts with an accounting firm to conduct an 

audit of each Reserve Bank every year, and FRB staff members periodically 

review the operations of the Reserve Banks in key functional areas.

FIO: FIO and its staff are bound by federal law and regulation regarding the 

independence of decisions from external influences. As explained in FIO’s 

response to ICP/Std. 2.4, federal laws and Treasury regulations that address 
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conflicts of interest and related ethical issues are intended to ensure the 

integrity of FIO’s actions. 

2.2 There are explicit procedures regarding the appointment and dismissal of 

the head of the supervisor and members of its governing body, if such a 

governing body exists. When the head of the supervisor or members of its 

governing body are removed from office, the reasons are publicly 

disclosed.

2.2 States: The state insurance departments, and more specifically, the 

commissioners and their offices, are granted authority under state statutes by 

the applicable state legislative body to take various actions which collectively 

implement the function and powers of the state insurance department. The 

state insurance department is independent from the applicable state legislative 

body. The commissioner is either elected by the general population, 

appointed by the state governor, or overseen by an intermediate regulatory 

commission. The commissioner may serve for a fixed term of office or at the 

pleasure of the governor or appointing body. The commissioner is generally 

the only employee within the state insurance department whose position is 

either elected or appointed. 

Regardless of the method of attaining office, the insurance commissioner and 

his or her staff are accountable to the public for their work in office. State 

statutes generally provide the criteria needed to be eligible to be appointed to 

the position of commissioner and also provide the general grounds for 

removal from office. State laws, executive branch ethical codes, and 

insurance department protocols and procedures govern the official conduct of 

the commissioner and insurance department employees in discharging official 

functions. Taken together, these sources provide the means of imposing civil 

and criminal penalties and internal discipline in the event of wrongdoing, 

including removal from office or termination of employment. If a public 

employee is removed from office for a violation of state law they are subject 

to investigation or potential prosecution and that information is generally in 

the public domain.

FRB: Members of the FRB are appointed to a full or to an unexpired portion 

of a 14-year term. On appointment by the President and with the advice and 

consent of the Senate, one of the members is designated to serve as Federal

Reserve Chair, and another of the members is designated to serve as Vice

Chairman, for a four-year term. The positions are non-partisan, and there is no 

expectation that Governors will resign at the conclusion of the term of the

President who appointed them. Members of the FRB can be removed for 
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cause by the President. See 12 U.S.C. § 242.

FIO: By statute, the Director of FIO is appointed by the Secretary of the 

Treasury and is a career reserved position. Initial career appointments must 

meet the competitive Senior Executive Service (SES) merit staffing provisions 

in 5 U.S.C. § 3393 at the time of selection. The individual’s executive 

qualifications must be certified by an Office of Personnel Management (OPM) 

administered Quality Review Board (QRB) before appointment. The standard 

for action (removal or suspension) is taken against an executive in accordance 

with 5 U.S.C. § 7543 for misconduct, neglect of duty, malfeasance, or failure 

to accept a direct reassignment. 

2.3 The institutional relationships between the supervisor and the executive 

and judicial authorities are clearly defined and transparent. 

Circumstances where executive overrides are allowed are specified.

2.3 States: The institutional relationships between the supervisor and the 

executive and judicial authorities are clearly defined and transparent. The 

executive and legislative branch of government each has its areas of 

responsibility. State laws make specific references to the insurance 

commissioner being charged with carrying out the laws related to the 

regulation of the insurance business. While the insurance commissioner may 

have certain accountability to executive and legislative branch officials for his

or her official actions, state law clearly vests the insurance commissioner with 

the official responsibility to regulate the insurance business in that state.

FRB: Members of the FRB are appointed by the President with the advice

and consent of the Senate. The actions taken by the FRB are not subject to 

executive overrides.

U.S. federal courts have authority to review agency actions made reviewable 

by statute as well as any final agency action for which there is no other 

adequate remedy in court. 5 U.S.C. § 704. The courts have recognized that 

this authority does not permit a review of everything done by an administrative 

agency. Much of what an agency does in anticipation of a final action is not 

reviewable by the courts. However, final agency enforcement orders are 

generally subject to judicial review. See, e.g., 12 U.S.C. § 1818(h)(2). 

FIO: As an office within Treasury, FIO is a part of the executive branch of 

the U.S. government. Federal courts are part of the judicial branch of the U.S. 

government, which is independent from the executive branch. The 

relationship between FIO (as part of Treasury) and the judicial branch of the 

United States, as well as the judicial branches of the governments of the states, 
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are defined by federal law and the U.S. Constitution. 

2.4 The supervisor and its staff are free from undue political, governmental 

and industry interference in the performance of supervisory 

responsibilities. The supervisor is financed in a manner that does not 

undermine its independence. The supervisor has discretion to allocate its 

resources in accordance with its mandate and objectives and the risks it 

perceives.

2.4 States: The state insurance commissioner is clearly vested with 

official responsibility for carrying out and implementing the insurance laws of 

a state. Although state insurance regulators are subject to appropriate 

oversight or scrutiny their supervisory functions are defined by law and 

provide adequate safeguards regarding undue political, governmental, or 

industry influence. Insurance commissioners possess legally-defined 

oversight and responsibility, thereby having discretion to allocate resources to 

address regulatory priorities, which is also assessed as part of the NAIC 

Accreditation Program. State statutes and department policies restrict gifts 

and/or require disclosures to prohibit the acceptance of inappropriate gifts and 

things of value. Insurance department employees may also be subject to postemployment restrictions on contacts between former employees and 

the insurance department.

FRB: Members of the FRB are appointed to a full or to an unexpired portion 

of a 14-year term. On appointment by the President and with the advice and 

consent of the Senate, one of the members is designated to serve as Federal

Reserve Chair, and another of the members is designated to serve as Vice

Chairman, for a four-year term. The positions are non-partisan, and there is no 

expectation that a Governor of the FRB will resign at the conclusion of the

term of the President who appointed him or her. See 12 U.S.C. § 242. The 

long-tenured nature of these appointments allows the FRB to be free from 

undue political interference or pressure.

Additionally, the FRB is self-funded and is not Congressionally appropriated. 

The FRB’s income comes primarily from the interest on government 

securities that it has acquired through open market operations. Other sources 

of income are the interest on foreign currency investments held by the Federal 

Reserve System; fees received for services provided to depository institutions, 

such as check clearing, funds transfers, and automated clearinghouse 

operations; and interest on loans to depository institutions. The FRB has 

discretion to allocate its resources in accordance with its mandate and 
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objectives and the risks it perceives.

FIO: As an office within Treasury, FIO is subject to criminal conflict of 

interest statutes, the Executive Branch Standards of Conduct, and Treasury’s 

supplemental ethics regulations. These laws, rules, and regulations effectuate 

two core concepts: (1) employees shall not use public office for private gain; 

and (2) employees shall act impartially and not give preferential treatment to 

any private organization or individual. FIO is funded through Treasury’s 

appropriations approved by the U.S. Congress. FIO is not funded by the 

insurance industry. FIO, subject to Treasury priorities, has discretion to 

expend the funds allocated to FIO by Treasury.

2.5 There are clear and transparent regulatory requirements and 

supervisory procedures which are appropriate for the objectives they are 

intended to meet. The supervisor applies them consistently and equitably, 

taking into account the nature, scale and complexity of insurers. These 

regulatory requirements and supervisory procedures are published.

2.5 States: All laws, regulations and rules operated under or issued by a state 

insurance regulator go through a public approval process, either at the 

legislative or administrative level. Where legislation authorizes the 

insurance regulator to undertake rule-making, state administrative procedure 

acts govern that process. As a result, state insurance departments publish 

proposed rules or regulations in the state register and/or on state websites, 

accept public comments, and may hold public hearings prior to 

implementation or adoption. Regulatory actions taken by state regulators are 

typically matters of public record and are subject to administrative appeals 

processes and judicial review where appropriate. Further, insurance 

departments maintain industry- and consumer-related information on their 

websites, which include posting relevant notices and bulletins that may 

announce new rules or changes in existing regulatory or supervisory 

procedures and rules.

NAIC model laws and regulations, which provide the basis for many state 

laws on subject’s common to all states, are also developed through an open 

process. Once adopted by the NAIC, state insurance regulators may propose 

model laws to their state legislative bodies for adoption under an open, 

legislative process or may initiate rule-making through an open 

administrative process at the insurance department level. The goal of the 

development of NAIC model laws and regulations is to promote uniformity 

among states while recognizing that the authority to implement model laws 

or regulations rests with the states themselves.
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FRB: The Dodd-Frank Act added authority for a regulatory and supervisory 

mandate for nonbank financial companies to the FRB’s established authority 

for regulation and supervision of BHCs and SLHCs. Like its powers over 

large BHCs, the FRB’s authority over nonbank financial companies includes, 

among others, the power to impose capital, liquidity, and risk management 

requirements, examine firms and their subsidiaries, require the creation of 

intermediate holding companies, and take enforcement action. See 12 U.S.C. 

§ 5365. The FRB is in the process of further expanding its supervisory 

program concerning nonbank financial companies. The framework for the 

supervisory program applicable to large BHCs and nonbank financial 

companies is set out in SR 12-17. Additional supervisory guidance is 

expected to be issued to examiners, the industry, and the public through the 

FRB’s existing modes of communication, which include Supervisory and 

Regulations (SR) letters and other examination material. 

FIO: FIO operates in a transparent manner. For example, FIO’s work with 

the FSOC is done pursuant to the FSOC’s transparency policy and 

promulgated regulations which govern FSOC’s work, e.g. 12 CFR Part 1301 

and 12 CFR Part 1310. 

The Federal Advisory Committee on Insurance (FACI), which advises FIO, 

convenes only in public meetings, and all documents related to the FACI are 

publicly available. Many aspects of FIO’s work, including rule-making, 

interpretations, and the announcement of FACI meetings, are publicized in 

Federal Register Notices. Finally, FIO informs the public of its mission and 

procedures through direct engagement and in speeches and Congressional 

testimony, primarily by the Director of FIO. 

2.6 Regulatory requirements and supervisory procedures are reviewed 

regularly. All material changes are normally subject to prior public 

consultation.

2.6 States: Regulatory requirements are subject to review through several 

channels. NAIC model laws and regulations, which provide the basis for 

many state laws, are regularly reviewed and updated. This process, which is 

conducted openly, allows for regulators and stakeholders to consider changes 

through a deliberative process. For example, the Model Holding Company 

Act was significantly revised in 2010 in response to the financial crisis and, as 

of this writing, further revisions are being considered in light of international 

developments on group supervision. Additionally, state insurance regulators 

are accountable to the public’s elected representatives in the state legislature; 

legislators may require public testimony or submission of evidence related to 
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the continuing efficacy of regulatory policy as expressed through laws and 

rule-making. Similarly, the insurance department may initiate rule-making 

involving new regulations or existing regulations; as noted previously, 

the rule-making process is subject to a state’s administrative procedure act.

FRB: Material changes to the FRB’s regulations and supervisory procedures 

are publicized. The FRB typically solicits public feedback on material 

changes to its regulations and material supervisory procedures prior to their 

implementation. The FRB regularly undertakes an internal evaluation process 

to ensure its staff meets its supervisory need. This includes evaluation of 

hiring and retention programs to attract and retain staffs that have the 

necessary critical skills. In addition, the agencies approve annual training 

budgets and insist that staff undergo adequate and relevant training. 

FIO: As set forth in the response to ICP 1, FIO’s authorities are set forth in 

the Dodd-Frank Act, and subject to the federal law-making process. Changes 

to FIO’s authorities would be carried out publicly through the federal 

legislative process. Further, as noted in its response to ICP/Std. 2.5, FIO 

publishes notices in the Federal Register relating to rule-making, 

interpretations, and other FIO oversight and policy-making activities. In 

addition, as set forth in its response to ICP/Std. 2.1, FIO is subject to a wide 

range of governmental oversight. 

2.7 The supervisor publishes information on the insurance sector, about its 

own role and how it performs its duties.

2.7 States: All legal information defining the authority, responsibilities and 

duties of each insurance department is publicly available. Insurance 

department websites typically link to such information or provide it 

directly. Insurance departments generally publish relevant financial and 

statistical information about the state of the insurance industry and the 

respective state’s insurance marketplace annually. Many states issue annual 

reports based upon information accumulated during the relevant and 

immediately past fiscal year. In addition to the annual report and website, 

states may also publish information about their roles and responsibilities in a 

Strategic Plan or similar publication. Additionally, the NAIC produces an 

annual publication, the Insurance Department Resources Report, which

contains comprehensive state-by-state and national information on the state of 

the insurance marketplace and the resources available to insurance regulators.

FRB: The FRB and its staff regularly publish and disseminate information on 

the U.S. banking system through supervisory guidance, white papers, 

speeches, testimony, and information posted to its website. These 
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publications cover, among other topics, insurance. These publications often 

discuss the FRB’s supervisory role and how it performs its duties. It is 

anticipated that additional guidance and related information about the FRB’s 

supervision of nonbank financial companies that are financial companies 

engaged in the business of insurance will be forthcoming. 

FIO: FIO is required by statute to provide periodic and one-time reports on 

the U.S. and global insurance industry. See 31 U.S.C. § 313(n)-(p). These 

include: (i) annual reports regarding the insurance industry and other 

information deemed relevant by the Director of FIO or requested by the 

relevant Congressional committees; (ii) the Modernization Report; (iii) a 

report on the U.S. and global reinsurance market; and (iv) a report related to

natural catastrophe insurance in the United States. In addition, FIO provides 

information about the insurance sector, its own role, and how it performs its 

duties through direct engagement with stakeholders, and in public 

engagement, including through speeches and Congressional testimony. 

2.8 There are processes to appeal against supervisory decisions, including 

using judicial review. These processes are specific and balanced to 

preserve supervisory independence and effectiveness. However, they do 

not unduly impede the ability of the supervisor to make timely 

interventions in order to protect policyholders’ interests.

2.8 States: There are legal and administrative processes in place to appeal 

supervisory decisions both to the insurance departments and through judicial 

review. These processes are outlined in statutes or agency rules. Generally 

supervisory decisions remain in effect until an appeal has been decided, but if 

specific conditions have been met, the supervisory decision may potentially be 

suspended or stayed (while a supervisory decision is on appeal a court could 

find that specific conditions of a supervisory decision have been met and order 

all or part of the decision suspended). Administrative safeguards allow for 

impartial review of such decisions; for example, where the insurance 

commissioner may be required to serve as a hearing officer in an 

administrative matter, internal “walls” will be utilized to ensure fairness and 

impartiality. While the appeals process affords recourse and review for the 

object of governmental regulatory action, they do not impede the ability of 

insurance departments to make timely interventions; in fact, many state laws 

provide specifically for such timely interventions where required by exigent 

circumstances.

FRB: Process for internal supervisory review: Since 1995, the FRB has 

established an independent, intra-agency process to review appeals of material 
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supervisory determinations consistent with Section 309 of the Riegle 

Community Development and Regulatory Improvement Act of 1994, 12 

U.S.C. § 4806. Through this process, supervisory determinations made during 

the examination and inspection process may be appealed expeditiously to 

independent FRB personnel. 

Process for appeals of enforcement orders: As discussed more fully in the 

FRB’s response to ICP 11, in instances where the FRB seeks to compel an 

institution or individuals within its jurisdiction to take certain action through 

issuance of a formal order, the subjects may contest the matter in an 

administrative proceeding before the FRB. If those subjects are dissatisfied 

with the final decision issued by the FRB in the administrative proceeding, 

they may pursue an appeal of that decision in the federal courts. 

FIO: FIO has a statutory role in the FSOC designation process and in the 

resolution process as set forth in Title II of the Dodd-Frank Act. Both of these 

processes include mechanisms for appeals. 

FIO has authority to recommend to the FSOC that it designate an insurer, 

including the affiliates of such insurer, as an entity subject to regulation as a 

nonbank financial company supervised by the FRB. The FSOC designation 

process includes a specific process to allow companies under consideration to 

challenge and appeal a proposed designation. See 12 U.S.C. § 5323(e). 

Under Title II of the Dodd-Frank Act, FIO and the FRB (in consultation with 

the FDIC) may recommend that the Secretary of the Treasury (in consultation 

with the President) make a systemic risk determination, pursuant to statutorily 

prescribed criteria, to place an insurer or a holding company for which the 

largest U.S. subsidiary is an insurer into receivership. (Title II, and FIO’s 

authority under Title II, is discussed in further detail in FIO’s response to ICP 

12.) If the board of directors of the insurer does not acquiesce or consent to 

the Secretary’s systemic risk determination, the Secretary shall petition the 

United States District Court for the District of Columbia for an order 

authorizing the Secretary’s determination. The insurer has an opportunity to 

oppose the determination in a hearing before this court. If the district court 

rules in favor of the Secretary, the insurer may appeal to the Court of Appeals 

for the District of Columbia Circuit, and then to the United States Supreme 

Court. See 12 U.S.C. § 5382. 
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2.9 The supervisor, including its staff and any individual acting on its behalf 

(presently or in the past), are required by legislation to protect the 

confidentiality of information in the possession of the supervisor, 

including confidential information received from other supervisors. The 

supervisor maintains appropriate safeguards for the protection of 

confidential information. Wrongful disclosure of confidential information 

is subject to penalties. The supervisor denies any request for confidential 

information, other than when required by law, or when requested by 

another supervisor who has a legitimate supervisory interest and the 

ability to uphold the confidentiality of the requested information.

2.9 States: Confidentiality rules are specified in legislation and may be 

reinforced in other ways. It should be noted that insurance departments 

maintain internal protocols and procedures governing the protection of 

information, including requirements that confidential information may be 

accessed only by those with a “need to know,” information technology 

protocols governing access and security, and processes for the handling and 

safe storage of confidential information. Responses to ICP 3 provide detailed 

confirmation about the ability of insurance regulators to protect from 

disclosure confidential information, including confidential information from 

other regulators; professional secrecy requirements, including penalties for 

breaches of such requirements; and processes for protecting confidential 

information from attempts at disclosure by third parties.

FRB: Unless authorized by law, it is a crime for an employee of the U.S. 

federal government to divulge, disclose, or make known in any manner trade 

secrets or other confidential business information collected in the course of

employment or official duties. See 18 U.S.C. § 1905. To ensure that 

appropriate safeguards exist, the FRB has adopted detailed, clear rules 

regarding the treatment of confidential information. See 12 CFR Part 261. 

These rules set forth, among other things, the procedures for limited release of 

exempt and confidential supervisory information and the procedures for 

protecting confidential business information. In addition, the FRB has 

numerous, public, supervisory policy letters concerning treatment of 

confidential and sensitive information, among other topics related to 

information handled by the FRB and its staff.

FIO: Federal law, including Title V of the Dodd-Frank Act, affords 

protection of confidential information collected or otherwise obtained by FIO. 

See 31 U.S.C. § 303(e)(5). Similarly, FIO, as an office within Treasury, is 

subject to FISMA, which requires that a federal agency review information 

and determine appropriate security controls over that information 
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commensurate with risk. Further, it is against the law for FIO’s staff members 

to divulge or disclose confidential business information collected in the course 

of employment or official duties. See 18 U.S.C. § 1905. In addition, as an 

office of Treasury, FIO is subject to Treasury policies and procedures 

regarding the treatment and protection of protected information. See, e.g., 

Treasury Security Manual – TD P 15-71. Inappropriate disclosure of 

confidential information may be subject to sanctions, depending on the 

circumstances. In addition, members of FIO’s staff have entered into 

confidentiality agreements with the Bank for International Settlements (BIS) 

for ongoing work with the IAIS to perform field testing of proposals for 

enhanced requirements, including international capital standards, that would 

apply to Internationally Active Insurance Groups (IAIGs), as well as work 

involving the assessment of confidential insurer information in connection 

with the identification of Global Systemically Important Insurers (G-SIIs). 

Finally, FIO is also subject to the confidentiality rules of the FSOC, which are 

set out in the Dodd-Frank Act, the Rules of Organization of the Financial 

Stability Oversight Council (known as the Bylaws), a Memorandum of 

Understanding regarding the treatment of non-public information shared 

among its member agencies, and the FSOC Transparency Policy.

2.10 The supervisor and its staff have the necessary legal protection against 

lawsuits for actions taken in good faith while discharging their duties, 

provided they have not acted illegally. They are adequately protected 

against the costs of defending their actions while discharging their duties.

2.10 States: There are necessary legal protections for the insurance department 

and its staff protecting them against lawsuits for actions taken in good faith 

while discharging duties. Any administrative or legal challenges to official 

actions are made in the name of the insurance commissioner in his or her 

official capacity, and such challenges are defended by insurance department 

counsel, the state’s attorney general office, or a combination of the two. Costs 

incurred for actions taken in good faith while discharging duties are generally 

recoverable but may have to be repaid if it is subsequently found that such 

person was guilty of wilful intent or gross negligence or was found by a court 

not to be acting in good faith. In the United States, the traditional doctrine of 

“sovereign immunity” limits claims that can be brought against state 

governments and employees acting as agents of the state. Although states 

have amended their laws over the years to provide avenues of redress for 

plaintiffs, many states still prescribe particular procedures for claims against 

the state and limit damages.

FRB: The FRB and its staff are protected against lawsuits for actions and 
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omissions made while discharging their duties in good faith. Sovereign 

immunity bars lawsuits without specific statutory authorization to pursue such 

litigation. Common law qualified immunity protects federal banking 

agencies’ heads and staff from liability for the violation of an individual’s 

federal Constitutional rights in connection with employees’ performance of 

discretionary functions, as long as the employees’ conduct does not clearly 

violate established statutory or Constitutional rights. 

Lawsuits are permitted against federal banking agencies’ employees for acts 

and/or omissions that cause injuries while acting within the scope of their 

employment pursuant to the Federal Tort Claims Act, 28 U.S.C. § 2679. In 

such a case, the United States would substitute itself as the defendant upon the 

Attorney General’s certification that an employee was acting within the scope 

of his office or employment at the time of the incident giving rise to the tort 

claim. See 28 U.S.C. § 2679(d)(2). Moreover, an exception to the act protects 

employees from lawsuits involving the execution of a statute or regulation or 

the exercise or performance or the failure to exercise or perform a 

discretionary function or duty, whether or not the employee abused the 

discretion involved. See 28 U.S.C. § 2680(a).

FIO: FIO and its staff are protected against lawsuits by the sovereign 

immunity of the U.S. government for actions taken in good faith while 

discharging duties. 

2.11 The supervisor has adequate resources, financial or otherwise, sufficient 

to enable it to conduct effective supervision. Its staffing policies enable it 

to attract and retain highly skilled, competent and experienced staff. The 

supervisor provides adequate training for its staff. The supervisor has the 

ability to hire or contract the services of outside experts when necessary.

2.11 States: Insurance department revenues are derived primarily from taxes 

(premium, retaliatory, franchise and income-based); fees (filing, examination, 

licensing); and fines and penalties. These revenues are sufficient to fund the 

insurance departments and return additional revenues typically to the general 

fund of each state. The NAIC Accreditation Program assesses and verifies 

whether each state insurance department can make an appropriate allocation 

of its available resources to effectively address its regulatory priorities. This 

requires the state insurance department to hire, train and maintain sufficient 

staff with high professional standards. This also requires the state insurance 

department to consider the need to hire external specialists when appropriate. 

The three standards in this area address professional development, minimum 

educational, and experience requirements, and the ability to attract and retain 
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qualified personnel. Where needed, insurance departments are specifically 

authorized by law to retain outside experts (e.g., evaluation of complex 

financial transactions or actuarial reserve levels) with the costs to be borne by 

the insurer.

Insurance departments have training programs in place and the NAIC offers 

regular regulator training. Many states also leverage resources available to 

them through the NAIC, such as staff to offer financial examination and 

analysis support. State regulators, through the NAIC, have also established an 

Examination Peer Review program to assess and improve examination 

practices. A similar program is under development for Own Risk Solvency 

Assessment (ORSA) filings.

FRB: The FRB is self-funded and is not subject to the Congressional budget 

process or Congressional appropriations.

The FRB undertakes an internal evaluation process to ensure its staff meets its 

supervisory responsibilities. This includes evaluation of hiring and retention 

programs to attract and retain staffs that have the necessary critical skills. The 

FRB has annual training budgets and insists that staff undergo adequate and 

relevant training. On occasion, the FRB hires or contracts with outside 

experts to provide services that assist the FRB in carrying out its supervisory 

objectives.

FIO: FIO has adequate resources and staffing policies to attract and retain 

skilled, competent, and experienced staff members. As an office within 

Treasury, FIO’s staff members have the opportunity to receive adequate 

training on a variety of subjects. The Director of FIO has the ability to hire or 

contract the services of outside experts when necessary.

2.12 The supervisor and its staff act with integrity and observe the highest 

professional standards, including observing conflict of interest rules.

2.12 States: State laws define the authority of the insurance commissioner and his 

or her staff to act. This is supplemented by state ethics laws and codes of 

conduct, which ensure compliance with standards of professional 

conduct. Further, insurance department staff may be subject to internal 

conflict of interest rules and may be required to acknowledge the ethical codes 

in writing when hired and sign a statement of compliance 

annually. Additionally, insurance department employees who are members of 

certain professions (e.g., lawyers, actuaries) may be subject to relevant codes 

of conduct and disciplinary procedures specific to that profession.
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FRB: The FRB insists that all staff, including the staff of the Federal Reserve 

Banks (discussed in more detail in the response to ICP/Std. 2.13 below), 

maintain high professional standards and exhibit high integrity. Federal laws 

and regulations, as well as individual conflict-of-interest rules and codes of 

conduct, help to ensure that these standards are met. 

FIO: As an office of Treasury, FIO and its staff are held to high standards of 

integrity and professionalism, and are subject to the Standards of Ethical 

Conduct for Employees of the Executive Branch, which include rules 

regarding conflicts of interest, gifts from outside sources, impartiality, misuse 

of position, seeking other employment, and outside activities. See 5 C.F.R. 

Part 2635.

2.13 Where the supervisor outsources supervisory functions to third parties, 

the supervisor sets expectations, assesses their competence and 

experience, monitors their performance, and ensures their independence 

from the insurer or any other related party. Outside experts hired by the 

supervisor are subject to the same confidentiality rules and professional 

standards as the staff of the supervisor.

2.13 States: The use of third-party contractors may occur where and to the extent 

authorized by statute. In such cases, the insurance regulator controls the 

relationship, manages contacts, and oversees the work of the contractor. The 

contract between the insurance department and the contractor requires the 

contractor to confirm the lack of conflicts of interest and to meet 

certain performance expectations, including adhering to state rules on ethics 

and government procurement. As a result, contractors are generally bound by

the same rules or codes of professional standards as if that contractor was an 

insurance department employee.

FRB: The FRB delegates certain supervisory functions to twelve Federal 

Reserve Banks (Reserve Banks) and their branches located throughout the 

United States. This system of coordinated supervision is not traditional 

outsourcing, but Reserve Bank employees are not FRB or federal government 

employees. The FRB sets expectations for the Reserve Banks’ supervision of 

entities subject to FRB supervision, regularly assesses the competence and 

experience of Reserve Bank staff, monitors the performance of Reserve Bank 

staff, and ensures the independence of the Reserve Bank from supervised 

entities by, among other things, prohibiting the Reserve Bank from acting on 

applications and notices filed by supervised entities whose directors are also 

directors of the Reserve Bank.
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FIO: FIO has not outsourced, and does not currently envision outsourcing, 

any of its authorities.

ICP 3 Information Exchange and Confidentiality Requirements

3 The supervisor exchanges information with other relevant supervisors 

and authorities subject to confidentiality, purpose and use requirements.

3 States: State insurance laws generally provide for the commissioner to share 

confidential information pursuant to statutory authorization. In some 

instances, state insurance laws will provide general authorization for the 

commissioner to share with other governmental entities; in more common 

instances, state insurance laws will provide for specific authorization to share 

certain types of information (e.g., examination information and holding 

company information) with other governmental entities. The range of 

governmental entities with which the commissioner may be authorized to 

share information include other state, federal and international regulators and 

state, federal and international law enforcement authorities.

FRB: The FRB has in place a number of formal and informal mechanisms for 

information sharing, which, among other things, are an integral part of 

supervisory programs providing for the comprehensive consolidated 

supervision of banks, holding companies and nonbank financial companies. 

FRB staff regularly exchanges information with other U.S. federal banking 

regulators, state banking regulators, certain foreign regulators, FIO, state 

insurance regulators, the NAIC, and other federal agencies on issues related to 

its supervision, including insurance capital requirements and stress testing. As 

a member of FSOC, FRB is a signatory to the FSOC’s multi-lateral 

memorandum of understanding regarding the treatment of non-public 

information shared among its member agencies. Further, the FSOC has 

entered into MOUs with approximately 19 state insurance regulators.

Unless authorized by law, it is a crime for an employee of the U.S. federal

government to divulge, disclose, or make known in any manner trade secrets

or other confidential business information collected in the course of

employment or official duties. See 18 U.S.C. § 1905. However, the FRB has

statutory powers that allow it to share information with appropriate parties. 

The importance and necessity of maintaining the confidentiality of the

information is highlighted in several statutory and regulatory provisions, as is

the requirement that the information be used for lawful supervisory purposes. 

The FRB has promulgated rules and policies implementing the civil and 

criminal statutes relating to the treatment of confidential supervisory and bank
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information. See 12 CFR Part 261.

FIO: In general, federal regulatory agencies and offices within Treasury, 

including FIO, exchange information and coordinate efforts with one another 

and with state regulators. Pursuant to its authority under Title V of the DoddFrank Act, “in carrying out the functions required under [Title V], [FIO] may 

receive and collect data and information on and from the insurance industry 

and insurers; enter into information-sharing agreements; analyze and 

disseminate data and information; and issue reports regarding all lines of 

insurance, except health insurance.” 31 U.S.C. § 313(e)(1). “Any data or 

information obtained by [FIO] may be made available to State insurance 

regulators, individually or collectively, through an information-sharing 

agreement that (i) shall comply with applicable Federal law; and (ii) shall not 

constitute a waiver of, or otherwise affect, any privilege under Federal or State 

law (including the rules of any Federal or State court) to which the data or 

information is otherwise subject.” 31 U.S.C. § 313(e)(5)(C). FIO has entered 

into an information-sharing agreement with the NAIC. FIO will continue to 

develop data collection, analysis, and sharing arrangements with other federal 

agencies and state regulators. 

As a member of the FSOC, FIO is a signatory to the FSOC’s multi-lateral 

memorandum of understanding regarding the treatment of non-public 

information shared among its member agencies. Further, the FSOC has 

entered into MOUs with approximately 19 state insurance regulators. 

In addition, members of FIO’s staff have entered into confidentiality 

agreements with BIS for ongoing work with the IAIS to perform field testing 

of proposals for enhanced requirements, including international capital 

standards that would apply to IAIGs, as well as work involving the assessment 

of confidential insurer information in connection with the identification of GSIIs. 

Pursuant to Title V, the confidential status of information provided to FIO, 

whether by operation of law or by agreement, continues after that information 

is provided to FIO: “Any requirement under Federal or State law to the extent 

otherwise applicable, or any requirement pursuant to a written agreement in 

effect between the original source of any non-publicly available data or 

information and the source of such data or information to [FIO], regarding the 

privacy or confidentiality of any data or information in the possession of the 

source to [FIO], shall continue to apply to such data or information after the 

data or information has been provided pursuant to this subsection to [FIO].” 

31 U.S.C. § 313(e)(5)(B). 
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3.1 The supervisor has the legal authority and power to obtain and exchange 

supervisory information in respect of legal entities and groups, including 

the relevant non-regulated entities of such groups.

3.1 FRB: The FRB has authority pursuant to section 161(a)(1) of the Dodd-Frank 

Act, 12 U.S.C. § 5361(a)(1), to require nonbank financial companies to submit 

reports concerning the financial condition of the company and subsidiaries, 

among other items. The FRB may require a nonbank financial company to 

supply copies of reports and supervisory information the firm has provided to 

other federal or state regulators. See 12 U.S.C. § 5361(a)(3). The FRB may 

also request information that facilitates the FRB’s examination of any 

nonbank financial company. See 12 U.S.C. § 5361(b). The FRB has authority 

pursuant to the BHC Act, HOLA, and the FRA to require BHCs, SLHCs, and 

state member banks, respectively, to submit a broad range of information, 

including annual and quarterly reports. See U.S.C. § 1844(c), 12 U.S.C. § 

1467a(b), and 12 U.S.C. § 324, respectively. Where necessary and 

appropriate, the FRB may request supervisory information concerning nonregulated subsidiaries of regulated entities.

The response to ICP/Std. 3.2 addresses the FRB’s authority to exchange 

supervisory information.

States: State insurance regulators have broad authority to obtain information 

from regulated insurers upon request or at specific times; hold hearings and 

compel the attendance of witnesses; command the production of documents; 

and examine the insurer at any time and at designated intervals. Insurers must 

regularly submit certain information related to the financial condition and 

business operations of the entity and its affiliates, whether regulated or nonregulated, including but not limited to annual and quarterly financial 

statements, risk-based capital reports, enterprise risk reports (new), ORSA 

summary reports (new as of 2015), and various holding company system 

filings. State insurance laws generally provide for the commissioner to share 

confidential information pursuant to statutory authorization.

State insurance laws generally include explicit protections from disclosure for 

confidential information received from other state, federal and international 

regulators and law enforcement officials where such information is 

confidential under the laws of the providing jurisdiction and is received with 

the notice and understanding that it is confidential.

FIO: See response to ICP 3. 
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3.2 The supervisor has the legal authority and power, at its sole discretion 

and subject to appropriate safeguards, to exchange information with 

other relevant supervisors. The existence of an agreement or 

understanding on information exchange is not a prerequisite for 

information exchange.

3.2 FRB: The FRB has broad legal authority to share information with other

banking and financial system supervisors. See, e.g., 12 U.S.C. §§

1817(a)(2)(A) and (C); 12 U.S.C. § 3412(e). The importance and necessity of

maintaining the confidentiality of the information is highlighted in several

statutory and regulatory provisions, as is the requirement that the information

be used for lawful supervisory purposes. The FRB has promulgated rules and 

policies implementing the civil and criminal statutes relating to the treatment

of confidential supervisory and bank information. See 12 CFR Part 261.

In general, prior to engaging in information sharing, the FRB requires

assurances that the information will be used only for lawful supervisory

purposes and will be kept confidential. 

The existence of an agreement or memorandum of understanding is not a 

prerequisite for information sharing; however, it often expedites the 

information sharing because the parties have documented their agreement to 

information sharing terms. If there is no agreement or memorandum of 

understanding the FRB can still share information with other regulators but 

will need to confirm that it meets the statutory and regulatory requirements 

(e.g., purpose/use, need for information, agreement to keep confidential to 

extent possible).

States: State insurance laws generally provide for the commissioner to share 

confidential information pursuant to statutory authorization. In some 

instances, state insurance laws will provide general authorization for the 

commissioner to share with other governmental entities; in more common 

instances, state insurance laws will provide for specific authorization to share 

certain types of information (e.g., examination information and holding 

company information) with other governmental entities. The range of 

governmental entities with which the commissioner may be authorized to 

share information include other state, federal and international regulators and 

state, federal, and international law enforcement authorities. These laws do 

not generally mandate that information be shared; rather, state insurance laws 

allow for sharing of confidential information at the state insurance 

commissioner’s discretion provided the recipient is able to maintain the 

confidentiality of the information.
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FIO: See response to ICP 3. Moreover, FIO is not required to have an 

information-sharing agreement in place with a supervisor in order to disclose 

information to that supervisor, as FIO may be permitted to do so under 

applicable law (depending on the information and/or the supervisor). 

3.3 The supervisor proactively exchanges material and relevant information 

with other supervisors. The supervisor informs any other supervisor in its 

jurisdiction and the supervisors of insurance group entities in other 

jurisdictions or sectors in advance of taking any action that might 

reasonably be considered to affect those group entities. Where prior 

notification is not possible, the supervisor informs other relevant 

supervisors as soon as possible after taking action.

3.3 States: State insurance laws generally provide for the commissioner to share 

confidential information pursuant to statutory authorization. In some 

instances, state insurance laws will provide general authorization for the 

commissioner to share with other governmental entities; in more common 

instances, state insurance laws will provide for specific authorization to share 

certain types of information (e.g., examination information and holding 

company information) with other governmental entities. The range of 

governmental entities with which the commissioner may be authorized to 

share information include other state, federal, and international regulators and 

state, federal, and international law enforcement authorities.

Recent amendments to state insurance holding company laws expanded and 

clarified the authority of state insurance regulators to participate in 

supervisory colleges (38 states have now adopted these amendments). Under 

these amendments, the state insurance commissioner is empowered to 

establish and/or participate in colleges; clarify the participation and functions 

of college members, including the establishment of a group-wide supervisor; 

and coordinate ongoing college activities. Therefore, supervisory colleges 

provide an additional forum for state insurance regulators to work with other 

supervisors with respect to actions that may affect the insurance group. 

FRB: The FRB has formal arrangements, including formal informationsharing agreements, with state insurance supervisors to coordinate and plan 

supervisory activities, both on a routine and an emergency basis, with respect 

to supervised entities having significant insurance operations. The FRB 

makes available relevant information to other banking agencies and functional 

regulators regarding the financial condition, risk-management policies, and 

operations of a holding company that may have a material impact on an 

individual regulated subsidiary. The other banking agencies make 
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information about bank subsidiaries of holding companies available to the 

FRB and to each other. Other functional regulators also provide information 

to the banking agencies concerning regulated entities within supervised 

entities that may have an adverse effect on the organization supervised by the 

FRB. Such sharing is an integral part of the U.S. supervisory process. 

FIO: Where appropriate within its statutory authorities, FIO proactively 

works with other authorities. For example, as per 12 CFR Part 1310, the 

FSOC, on which FIO serves, consults with any applicable primary financial 

regulatory agency(ies), state authority(ies) and/or home country authority(ies) 

for each nonbank financial company being considered for designation. In 

addition, FIO proactively works and exchanges information with other 

international authorities bilaterally and through the IAIS.

3.4 The supervisor has a legitimate interest and a valid purpose related to the 

fulfilment of supervisory functions in seeking information from another 

supervisor.

3.4 States: Using the Master Information Sharing and Confidentiality Agreement 

as an example (see response to ICP/Std. 3.5), state insurance regulators are 

required to demonstrate a proper regulatory purpose in requesting information 

from another regulator and that they possess legal authority to maintain the 

confidentiality of information being requested. Information sharing 

agreements with other regulatory bodies, including federal and international 

supervisors, may impose similar requirements. 

FRB: Formal and informal information sharing is an integral part of the 

FRB’s supervisory programs providing for the comprehensive consolidated 

supervision of the entities for whom it is charged with supervising. 

FIO: FIO may seek information from other authorities “in carrying out the 

functions required under [Title V of the Dodd-Frank Act].” 

31 U.S.C. § § 313(e)(1). 

3.5 The supervisor assesses each request for information from another 

supervisor on a case by case basis.

3.5 States: State insurance regulators assess requests for confidential information 

on a case-by-case basis and according to the terms of an information sharing 

agreement with another supervisor. The Master Information Sharing and 

Confidentiality Agreement, to which all 50 U.S. states, the District of 
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Columbia, Puerto Rico and Guam are signatories, generally prescribes the 

protocols and procedures for information sharing among U.S. state insurance 

regulators. The Agreement facilitates ongoing sharing of information among 

the signatory parties. In this manner, the Agreement operates similarly to the 

IAIS Multilateral Memorandum of Understanding (IAIS MMoU). The 

Agreement satisfies requirements in state laws that the receiving party of 

confidential information agree in writing to keep information confidential and 

demonstrate that they possess the statutory authority to maintain the 

confidentiality of such information. The Agreement establishes procedures 

for the request and safekeeping of confidential information. In sum, the 

Agreement operates as follows: The Requesting Department makes a written 

request for information and the Responding Department agrees to reply as 

soon as practicable. In receiving confidential information from the 

Responding Department, the Requesting Department agrees to limit use of 

confidential information to exercise of regulatory functions; protect 

confidential information from disclosure and preserve any privileges; inform 

Responding Department of any third-party or judicial requests for the 

information; consent to the intervention of Responding Department in any 

action to protect confidential information; and return confidential information 

upon request and destroy any copies.

Similar agreements are in place between states and federal and international 

regulators. Such agreements often include provisions similar to those 

described above. For example the IAIS MMoU (five states are signatories and 

many more have applications pending and/or are considering applying) 

imposes many similar requirements (i.e., valid purpose/prior explicit consent 

requirements).

FRB: The FRB assesses each request for information from another supervisor 

on a case-by-case basis.

FIO: FIO evaluates each request for information on a case-by-case basis.

3.6 The supervisor responds in a timely and comprehensive manner when 

exchanging relevant information and in responding to requests from 

supervisors seeking information.

3.6 States: As noted in the preceding answer, the terms of the Master 

Information Sharing and Confidentiality Agreement obligate the supervisor to 

respond to requests for confidential information as soon as practicable. Other 

similar information sharing and confidentiality agreements may prescribe 

similar requirements to respond as timely and comprehensively as possible.
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FRB: The FRB responds in a timely and comprehensive manner to each 

request for information from another supervisor. The FRB has formal 

arrangements, including formal information-sharing agreements, with state 

insurance supervisors to coordinate and plan supervisory activities, both on a 

routine and an emergency basis, with respect to supervised entities having 

significant insurance operations. In addition, the FRB has entered into 

bilateral formal information-sharing and cooperation agreements with 24 

foreign supervisors, including certain foreign supervisors with responsibilities 

for insurance supervision, and additional arrangements are in process. These 

memoranda of understanding and statements of cooperation have facilitated 

timely information sharing between the U.S. federal banking agencies and 

their foreign counterparts.

FIO: FIO responds in a timely and comprehensive manner when exchanging 

relevant information and in responding to requests from authorities seeking 

information.

3.7 Strict reciprocity in terms of the level, format and detailed characteristics 

of information exchanged is not required by the supervisor.

3.7 States: Such terms are not prescribed by state law and are not typical 

elements of information sharing and confidentiality agreements among 

supervisors. As noted above, state insurance laws authorize state insurance 

regulators to share confidential information with other supervisors provided 

the supervisor can demonstrate the ability to maintain the confidentiality of 

the information shared.

FRB: Strict reciprocity in terms of the level, format, and detailed 

characteristics of the information exchanged is not a prerequisite to 

information exchange.

FIO: FIO is not subject to any laws, regulations or rules that would demand 

strict reciprocity in terms of exchanged information. 

3.8 Before exchanging confidential information, the supervisor ensures that 

the party receiving the information is bound by confidentiality 

requirements.

3.8 States: Using the Master Information Sharing and Confidentiality Agreement 

as an example, state insurance regulators are required to demonstrate that they 

possess legal authority to maintain the confidentiality of information being 
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requested. State insurance regulators will consider the law pursuant to which 

the information is being requested and the confidentiality protections that 

“follow” confidential information prior to exchanging information with 

another supervisor. State insurance laws generally provide that, as a condition 

to sharing confidential information with other governmental entities, the state 

insurance regulator may be required to enter into a written agreement for that 

purpose and the receiving party must have the authority to maintain the 

confidentiality of the information provided.

FRB: In general, prior to engaging in information sharing, the FRB requires 

assurances that the information will be used only for lawful supervisory 

purposes and will be kept confidential. 

FIO: As noted in FIO’s response to ICP 3, the confidential status of 

information provided to FIO, whether by operation of law or by agreement, 

continues after that information is provided to FIO. See 31 U.S.C. § 

313(e)(5)(B). In general, FIO would require assurances from any authority 

requesting confidential information that the requesting authority will only use 

the information for lawful purposes and will keep the information 

confidential.

3.9 The supervisor generally permits the information it exchanges with 

another supervisor to be passed on to other relevant supervisors or other 

bodies in that jurisdiction, provided that the necessary confidentiality 

requirements are in place.

3.9 States: State insurance laws generally require that confidential information 

may be shared with other supervisors who can demonstrate their ability to 

maintain the confidentiality of such information. State laws typically do not 

address the question of the passing along of information. This issue is 

typically governed by the terms of the information sharing and confidentiality 

agreement pursuant to which the information was exchanged. The providing 

regulator may require their consent before the passing along of such 

information, but such consent is unlikely to be withheld if the providing 

regulator is authorized to share the information directly with the third-party 

entity seeking such information.

FRB: In accordance with relevant statutory and regulatory provisions, before 

the FRB discloses confidential supervisory information to a domestic or 

foreign supervisor it obtains that supervisor’s agreement to maintain the 

confidentiality of the received information to the extent possible under 

applicable law. Generally, FRB requires that domestic and foreign 

supervisors obtain the consent of FRB before sharing received information 
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with a third party.

FIO: As noted in FIO’s response to ICP 3, the confidential status of 

information provided to FIO, whether by operation of law or by agreement, 

continues after that information is provided to FIO. See 31 U.S.C. § 

313(e)(5)(B). FIO would require that necessary confidentiality requirements 

be in place before consenting to a requesting authority passing on information 

FIO had provided to other authorities. 

3.10 The supervisor receiving confidential information from another 

supervisor uses it only for the purposes specified when the information 

was requested. Before using the information for another purpose, 

including exchanging it with other parties, the supervisor obtains 

agreement of the originating supervisor.

3.10 States: The receiving supervisor will generally be required to demonstrate a 

proper regulatory purpose prior to the responding supervisor providing the 

information. Using the Master Information Sharing and Confidentiality 

Agreement as an example, the state insurance regulator expressly agrees to 

use such information for a proper regulatory purpose and the purposes for 

which the information is requested is evaluated by the responding regulator in 

deciding whether to release the information to the requesting regulator.

FRB: Obtained confidential material would be used by the FRB to carry out 

its supervisory responsibilities, which include ensuring the safety and 

soundness of the institutions subject to its supervision and conducting 

enforcement actions and investigations. In carrying out its lawful supervisory 

responsibilities, the FRB shares information with other agencies as discussed 

above, including appropriate enforcement authorities. 

FIO: In general, to the extent FIO requests confidential information, it does 

so “in carrying out the functions required under [Title V].” 31 U.S.C. § 

313(e)(1). Any information received in response to such a request would only 

be used in furtherance of those functions, and would be shared with other 

authorities as necessary to perform FIO’s statutory authority. 

3.11 In the event that the supervisor is legally compelled to disclose 

confidential information it received from another supervisor, the 

supervisor promptly notifies the originating supervisor, indicating what 

information it is compelled to release and the circumstances surrounding 

the release. Where consent to passing this information on is not given, the 
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supervisor uses all reasonable means to resist the demand and to protect 

the confidentiality of the information.

3.11 States: Using the Master Information Sharing and Confidentiality Agreement 

as an example, state insurance regulators are generally required to protect 

confidential information from disclosure and preserve any privileges; inform 

the provider of any third-party or judicial requests for the information; and 

consent to the intervention of the providing party in any action to protect 

confidential information. Even in cases where there are no outside or thirdparty attempts to compel the production of confidential information, state 

insurance regulators are bound by the Agreement to seek the consent of the 

providing party before passing along such information.

FRB: In circumstances in which the FRB is legally compelled to disclose 

confidential information it has received from another supervisor, the FRB 

notifies the originating supervisor indicating what information it has been 

compelled to produce and the circumstances surrounding the release. Where 

consent to passing this information on is not given, the FRB would use all 

reasonable means to resist the demand and to protect the confidentiality of the 

information.

FIO: If FIO were to be legally compelled to disclose confidential 

information received from another authority, FIO would notify that 

originating authority and identify the information it had been compelled to 

produce and the circumstances of that release. If the originating authority 

opposed the passing on of the information, FIO would use all reasonable 

means to resist the demand and protect the confidentiality of the information.

ICP 4 Licensing

4 A legal entity which intends to engage in insurance activities must be 

licensed before it can operate within a jurisdiction. The requirements and 

procedures for licensing must be clear, objective and public, and be 

consistently applied.

4 FIO: FIO is directly involved in the issues raised by ICPs 4 – 10, 13 – 18, 20 

– 21, and 23 through its representation of the United States at the IAIS and 

through its authority to monitor all aspects of the insurance industry, including 

its regulation.

States: States have statutes that require an entity to be licensed before 
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operating in its jurisdiction.

The NAIC has accreditation standards related to a state insurance 

department’s review of an application for initial licensure which require the 

department to have documented licensing procedures that include a review 

and/or analysis of key pieces of information included in a primary licensure 

application.

To create a national uniform application, the Uniform Certificate of Authority 

Application (UCAA) was created by the NAIC, and all states (and Puerto 

Rico) are accepting the UCAA with minor variations based on state laws. The 

application can be used for all lines of insurance except the Health 

Maintenance Organization (HMO). A company may need additional 

authorizations beyond receiving a Certificate of Authority to actually operate 

a business in some states. These additional state licensing requirements are 

based on either statutory or state specific requirements developed by the 

individual state. Specific state licensing requirements are generally available 

on the NAIC/UCAA web site, the state web sites or can be readily ascertained 

by contacting the state insurance department.

FRB: The FRB is not a licensing authority for insurance companies. 

4.1 To protect the interests of policyholders, a jurisdiction controls through 

licensing which entities are allowed to conduct insurance activities within 

its jurisdiction.

4.1 States: All insurance activities (except those exempted under legislation) 

must be conducted by entities either licensed by the state or, subject to 

legislation, licensed in another jurisdiction.

FRB: The FRB is not a licensing authority for insurance companies. 

4.2 The insurance legislation: 

 includes a definition of regulated insurance activities which are 

subject to licensing; 

 prohibits unauthorised insurance activities;

 defines the permissible legal forms of domestic insurers; 
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 allocates the responsibility for issuing licences; and 

 sets out the procedure and form of establishment by which foreign 

insurers are allowed to conduct insurance activities within the 

jurisdiction.

4.2 States: Regulated insurance activities are fully defined in legislation; the 

lines of business that are permitted to be licensed in a state are defined in each 

state’s statutes. Unauthorized insurance activities are explicitly prohibited and 

subject to specified sanctions (the level and type of sanction depends on the 

severity of the violation). The permissible legal forms of domestic insurers 

and procedures and form for establishment of foreign insurers are defined 

through a combination of insurance legislation and other legislation, such as 

state corporate law. In general, the state’s responsibility for issuing licenses is 

explicitly specified in legislation. 

FRB: The FRB does not implement or carry out state insurance law with 

respect to licensing or otherwise. 

4.3 Licensing requirements and procedures are clear, objective and public, 

and are consistently applied, requiring: the applicant’s Board Members, 

Senior Management, both individually and collectively, Significant 

Owners and Key Persons in Control Functions to be suitable; the 

applicant to satisfy capital requirements; the applicant to have a sound 

corporate or group structure and governance framework that does not 

hinder effective supervision; and the applicant to have sound business 

and financial plans.

4.3 States: Licensing requirements are printed in the UCAA Manual and posted 

on the NAIC/UCAA web site or state sites, which are publicly available. The 

UCAA application is the most universal licensing form currently being used 

by the majority of the states; the application information can be used as a basis 

for all general company licensing requirements in the United States.

The following forms shall be included with a UCAA application: an original 

executed application form identifying all lines of insurance the applicant is 

requesting authority to transact and is currently licensed to transact and is 

transacting in all jurisdictions.

The UCAA application includes a business profile of the applicant. Any other 

management offices that exercise control over insurance operations in any 
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state in which an applicant is applying for admission must also be included. 

Additional charts should be provided to depict any operation that is delegated 

to an affiliate or third party, and any situation where resources are pooled 

among affiliates.

The plan of operation portion of the business profile presents, in detail, the 

product lines currently sold and planned by the applicant, the applicant's 

marketing plan, a description of the applicant's current and expected 

competition (both regionally and nationally), and a discussion of how each 

state in which admission has been requested fits into that plan. A verification 

form and brief questionnaire should accompany the applicant's plan of 

operation.

The UCAA also requires that the applicant show it meets each state’s statutory 

minimum paid-in capital and surplus requirements. The level of surplus 

required is determined after considering the applicant’s product line, operating 

record and financial condition. Compliance with the statutorily prescribed 

minimum surplus requirement may not be sufficient for all applicants.

The UCAA application shall include a copy of the applicant's most recent 

Annual Statement. A copy of the applicant's actuarial opinion certification 

must also be included.

The UCAA application includes an audited report, performed by a Certified 

Public Accountant (CPA) who is not an employee of the applicant. The 

application shall include the applicant’s most recent Report of Examination 

from the insurance supervisor. If the applicant, its parent or its ultimate 

holding company, is not publicly traded, the application will also need to 

include a copy of the applicant's most recent audited consolidated financial 

statements, prepared in accordance with U.S. GAAP.

The UCAA application requires the applicant to submit an NAIC 

Management Discussion Analysis and a Risk-Based Capital Report. 

Applicants who are members of a holding company system will need to 

include a comprehensive debt-to-equity ratio statement. A summary of the 

applicant's reinsurance program, listing all reinsurance agreements and 

providing a basic explanation of each agreement shall also be included with 

the application. 

The suitability of the applicant’s Board members and Senior Management is 

considered at the individual level and collective level. Suitability of 

Significant Owners and Key Persons in Control Functions is considered when 

assessing applications. Applications are reviewed to ensure applicants satisfy 
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capital requirements; have a sound corporate or group structure and 

governance framework, and that the applicant has sound business and 

financial plans. The application review process is described in detail in the 

NAIC Company Licensing Best Practices Handbook, which is publicly 

available.

FRB: The FRB is not a licensing authority for insurance companies. 

4.4 Where an insurer is seeking to establish a branch or subsidiary in a 

foreign jurisdiction, the host supervisor concerned consults the home 

supervisor as appropriate before the issuance of a licence.

4.4 States: The state insurance departments generally consult with a relevant 

supervisor as appropriate before the issuance of a license. This process is 

described in the Company Licensing Best Practices Handbook which is 

publicly available.

FRB: The FRB is not a licensing authority for insurance companies. 

4.5 Where an insurer is seeking to conduct cross border insurance activities 

without a physical presence in the jurisdiction of the host supervisor, the 

host supervisor concerned consults the home supervisor as appropriate 

before allowing such activities.

4.5 States: If an insurer is seeking to conduct cross border insurance activities 

without a physical presence in a state, the state insurance department would 

consult the home supervisor on licensing matters as appropriate.

FRB: The FRB does not implement or carry out state insurance law with 

respect to licensing of cross border insurance activities. 

4.6 The supervisor assesses applications, makes decisions and informs 

applicants of the decision within a reasonable time which is clearly 

specified.

4.6 States: The NAIC adopted accreditation standards related to company 

licensing, which became effective January 1, 2012. The standards relate to a 

state insurance department’s review of an application for initial licensure. The 

standards verify that license applications are reviewed in a timely manner and 

that the insurance department has sufficient, qualified staff to perform this 

review. Further, the standards require that the state have appropriate and 
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sufficient procedures to perform this review, including an analysis of many of 

the items discussed above. The time period typically required is publicly 

communicated; this timeframe is contained in the Company Licensing Best 

Practices Handbook and in the UCAA Manual.

FRB: The FRB is not a licensing authority for insurance companies. 

4.7 The supervisor refuses to issue a licence where the applicant does not 

meet the licensing requirements. The supervisor has the authority to 

impose additional requirements, conditions or restrictions on an 

applicant where appropriate.

4.7 States: State insurance departments will not issue a license if the licensing 

requirements are not met; however, state insurance departments have the 

power to impose additional requirements, conditions or restrictions on the 

applicant, as necessary to ensure the consistent application of licensing 

requirements; these powers are broadly addressed by legislation and further 

elaborated by supervisory guidelines.

FRB: The FRB is not a licensing authority for insurance companies. 

4.8 If the licence is denied, conditional or restricted, the applicant is provided 

with an explanation.

4.8 States: In cases of denial or conditional or restricted approval, the applicant 

is informed of the decision and provided with an explanation by the state 

insurance department.

FRB: The FRB is not a licensing authority for insurance companies. 

4.9 A licence clearly states its scope.

4.9 States: The license provides sufficient information to identify the types and 

classes of insurance business that may be underwritten and describes any 

conditions or restrictions.

FRB: The FRB is not a licensing authority for insurance companies. 

ICP 5 Suitability of Persons
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5 The supervisor requires Board Members, Senior Management, Key 

Persons in Control Functions and Significant Owners of an insurer to be 

and remain suitable to fulfil their respective roles.

5 States: This requirement is met through a number of model laws, regulations 

and practices in U.S. insurance regulation. The primary processes to ensure 

the suitability of persons include the company licensing, off-site monitoring 

and on-site inspection processes. Recently, the NAIC has developed 

additional guidance for regulator use in these areas. The new Corporate 

Governance Annual Disclosure Model Act and accompanying Corporate 

Governance Annual Disclosure Model Regulation (adopted at the NAIC 

Corporate Governance Working Group at the Summer 2014 National 

Meeting) will require insurers to report detailed information on governance 

practices including suitability of persons on an annual basis. As this 

information is intended to be reported to regulators starting as early as 2016, 

additional guidance will be added into regulatory handbooks and manuals to 

explain how this information may be used in the assessment process.

FRB: With respect to the formation of BHCs and SLHCs, the BHC Act and 

HOLA, respectively, require the FRB to consider the managerial resources of 

any company that proposes to become a BHC or SLHC, which may include 

insurance companies, and the management of any bank or savings association 

subsidiary, including “the competence, experience, and integrity of the 

officers, directors, and principal shareholders of the [BHC/SLHC] or 

[bank/savings association].” 12 U.S.C. § 1842(c)(5); 12 U.S.C. § 1467a(e)(2). 

Subsequently, pursuant to the BHC Act, HOLA, and the Federal Deposit 

Insurance Act, the FRB requires BHCs, SLHCs, and other supervised entities 

to submit reports under oath that allow the FRB to assess the entity’s financial 

condition, systems for monitoring and controlling financial and operating 

risks, and management, among other items. See 12 U.S.C. § 1844(c), 12 

U.S.C. § 1467a(b), and 12 U.S.C. § 1831i, respectively. 

With respect to change-in-control notices filed with the FRB pursuant to the 

Change in Bank Control Act (CIBC Act), the FRB’s review includes an 

analysis of whether the competence, experience, and integrity of the acquiring 

person(s) or proposed management personnel of the proposal would be 

contrary to interests of depositors or the public. See 12 U.S.C. § 

1817(j)(7)(D).

The FRB has the authority to assess the suitability of management of a 

nonbank financial company and its subsidiaries pursuant to section 161(b) of 

the Dodd-Frank Act, 12 U.S.C. § 5361(b). 
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5.1 Legislation identifies which persons meet suitability requirements.

5.1 States: The license application process, uniform in all states, requires a 

business character report to be submitted for all officers, directors, key 

managerial personnel and individuals with a 10 percent or more beneficial 

ownership in the applicant and the applicant's ultimate controlling parent. 

Regardless of their source, the report must verify employment, education and 

military service for the past 10 years. Further, litigation, criminal, Uniform 

Commercial Code and bankruptcy records must be searched for the past 7 

years. Typically, at least one business character reference must be obtained 

for each individual, such as from an attorney, partner or other business 

associate familiar with the business dealings of the individual.

Title 18 § 1033 of the U.S. Code addresses crimes by or affecting persons 

engaged in the business of insurance. This law bars those convicted of 

various activities from working for an insurer.

FRB: With respect to BHCs and SLHCs, the BHC Act and HOLA, 

respectively, require the FRB to consider the managerial resources of any 

company that proposes to become a BHC or SLHC and the management of 

any bank or savings association subsidiary, including “the competence, 

experience, and integrity of the officers, directors, and principal shareholders 

of the [BHC/SLHC] or [bank/savings association].” 12 U.S.C. § 1842(c)(5); 

12 U.S.C. § 1467a(e)(2). 

With respect to change-in-control notices filed with the FRB, the CIBC Act 

requires that the competence, experience, and integrity of the acquiring 

person(s) or proposed management personnel of the proposal not be contrary 

to interests of depositors or the public. See 12 U.S.C. § 1817(j)(7)(D).

5.2 The supervisor requires that in order to be suitable, Board Members, 

Senior Management and Key Persons in Control Functions possess 

competence and integrity to fulfil their roles. Significant Owners are 

required to have the financial soundness and integrity necessary to fulfil 

their roles.

5.2 States: A number of requirements relate to the integrity of Board Members 

and Senior Management. These include: 

• There is a requirement for a business character report to be submitted 

through the license application process. States utilize this report to verify

employment, education and military service for the past (10) years. Litigation, 
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criminal, Uniform Commercial Code and bankruptcy records must be 

searched for seven (7) years. At least one business character reference must 

be obtained for each individual. 

• Title 18 § 1033 of the U.S. Code addresses crimes by or affecting 

persons engaged in the business of insurance. This law bars those convicted 

of various crimes from working for an insurer.

• SEC requirements holding the Board and senior management of

publicly-held insurers accountable for ethical behavior were implemented 

under the Sarbanes-Oxley Act of 2002. The Act also requires the disclosure 

of the entity’s code of ethics and waivers that have been granted or violations 

that have occurred. Additionally, for publicly-held insurers, the SEC requires 

the disclosure of details relating to the election of Board Members and the 

background and experience qualifying them for such a role.

The experience and qualifications of key persons in control functions are 

spelled out in legislation and also reviewed during the exam/analysis 

processes.

Business character reports described above are also required for Significant 

Owners. Also, the Model Holding Company Act and accompanying 

Regulation (#440 & 450) require the characteristics of a potential acquiring 

person or entity to be evaluated for compliance with certain requirements. 

The commissioner can disapprove of the acquisition if the financial condition 

of any acquiring party is such as might jeopardize the financial stability of the 

insurer, or prejudice the interest of its policyholders.

FRB: Pursuant to the BHC Act and HOLA, the FRB requires management 

and principal shareholders to have the competence and integrity to fulfil their 

roles. See 12 U.S.C. § 1842(c)(5); 12 U.S.C. § 1467a(e)(2).

With respect to change-in-control notices filed with the FRB pursuant to the 

CIBC Act, the FRB’s review includes an analysis of whether the competence, 

experience, and integrity of the acquiring person(s) or proposed management 

personnel of the proposal would be contrary to interests of depositors or the 

public. See 12 U.S.C. § 1817(j)(7)(D). 

With respect to management of insurance company subsidiaries of nonbank 

financial companies, BHCs, and SLHCs, the FRB coordinates with state 

insurance supervisors concerning suitability of management.
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5.3 The supervisor requires the insurer to demonstrate initially and 

thereafter, when requested by the supervisor, the suitability of Board 

Members, Senior Management, Key Persons in Control Functions and 

Significant Owners. The suitability requirements and the extent of review 

required depend on the person’s position and responsibility.

5.3 States: Supervisors initially require the filing of biographical affidavits, 

which the supervisor reviews to assess suitability. On an ongoing basis, the 

suitability of persons is reviewed during the financial examination with the 

focus being on the background and experience of individuals. This is 

typically done through the performance of Senior Management and Board 

Member interviews, which results in a suitability assessment. 

For publicly-held insurers, the SEC requires the disclosure of details regarding 

the election of Board Members and the background and experience qualifying 

them for such a role.

Significant Owner applicants are reviewed for compliance with suitability 

requirements before the proposed acquisition is approved by the domestic 

supervisor. On an ongoing basis, information regarding the financial 

condition of owners is filed with the department as part of the Form B filing 

requirements outlined in the Model Holding Company Regulation (#450) and 

subject to review and analysis.

FRB: With respect to management of insurance company subsidiaries of 

nonbank financial companies, BHCs, and SLHCs, the FRB coordinates with 

state insurance supervisors concerning suitability of management.

5.4 The supervisor requires to be notified by insurers of any changes in 

Board Members, Senior Management, Key persons in Control Functions 

and Significant Owners, and of any circumstances that may materially 

adversely affect the suitability of its Board Members, Senior 

Management, Key Persons in Control Functions and Significant Owners.

5.4 States: Insurers must notify the regulator of changes in officers or directors 

and file new biographical affidavits upon request. The Corporate Governance 

Annual Disclosure Model Act provides that insurers be required to provide 

information regarding internal suitability standards that the insurer has 

developed and disclose changes in the suitability status of those listed above. 

For publicly-held insurers, the SEC requires the disclosure of details relating 

to the election of new Board Members and the background and experience 
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qualifying them for such a role.

In addition, changes in the suitability status of owners are required to be 

reported through the holding company filings on an annual basis.

FRB: With respect to management of insurance company subsidiaries of 

nonbank financial companies, BHCs, and SLHCs, the FRB coordinates with 

state insurance supervisors concerning changes to management where 

appropriate. For BHCs and SLHCs, the FRB requires notice of changes to 

certain management positions for entities that are not, for example, in 

compliance with minimum capital requirements. See, e.g., 12 CFR Part 

225.72 and 238.73. 

5.5 The supervisor takes appropriate action to rectify the situation when 

Board Members, Senior Management and Key Persons in Control 

Functions or Significant Owners no longer meet suitability requirements.

5.5 States: The NAIC Model Regulation to Define Standards and Commissioners 

Authority for Companies Deemed to be in Hazardous Financial Condition 

(Hazardous Financial Condition Model Regulation #385) includes a suitability 

standard that can be enforced by requiring the insurer to “correct corporate 

governance practice deficiencies, and adopt and utilize governance practices 

acceptable to the commissioner.” This particular standard has been adopted 

by a majority of state insurance departments and is currently under 

consideration to be adopted as a required element of the NAIC Accreditation 

Program. 

Title 18 § 1033 of the U.S. Code addresses crimes by or affecting persons 

engaged in the business of insurance. This law bars those convicted of 

various activities from working for an insurer.

FRB: The FRB may remove an officer, director, or employee from an entity 

supervised by the FRB and prohibit the individual from further participation 

in the banking industry. An individual may be subject to a removal and 

prohibition order, if the individual has: (i) engaged in a violation of law or 

certain other specified misconduct; (ii) the misconduct caused a loss to the 

bank or holding company, or resulted in gain to the individual; and (iii) the 

individual has demonstrated continuing or wilful disregard for the safety and 

soundness of the bank or holding company, or the individual’s action involved 

personal dishonesty. See, e.g., 12 U.S.C. § 1818(e). The Dodd-Frank Act 

extended to the FRB direct enforcement authority over nonbank financial 

companies, except for those activities of the nonbank financial company that 

are regulated by another regulatory agency. In the event a perceived problem 
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involves a nonbank financial company primarily regulated by another agency, 

the FRB may refer the matter to that agency and, if no action is taken, may 

thereafter initiate its own action. 12 U.S.C. § 5362.

5.6 The supervisor exchanges information with other authorities inside and 

outside its jurisdiction where necessary to check the suitability of Board 

Members, Senior Management, Key Persons in Control Functions and 

Significant Owners of an insurer.

5.6 States: The NAIC’s Form A Database allows the states to share information 

with each other on a potential acquiring person. Accreditation standards 

require states to have the ability to share confidential information with each 

other. Various states have entered into MOUs to allow communication with 

other jurisdictions. Communication between states also occurs regularly 

through the Financial Analysis Working Group (FAWG) process in relation to 

suitability matters. States are responsive to suitability inquiries from non-U.S. 

jurisdictions when received.

FRB: The FRB exchanges information with other state and federal agencies 

concerning the competence and integrity of management and principal 

shareholders of supervised entities or companies or individuals that propose to 

control a supervised entity and its subsidiaries.

ICP 6 Changes in Control and Portfolio Transfers

6 Supervisory approval is required for proposals to acquire significant 

ownership or an interest in an insurer that results in that person (legal or 

natural), directly or indirectly, alone or with an associate, exercising 

control over the insurer. The same applies to portfolio transfers or 

mergers of insurers.

6 States: All states and the District of Columbia have adopted substantially 

similar language found within the Model Holding Company Act and its 

related Regulation regarding change of control for any licensed insurer. The 

Model Holding Company Act clearly defines “control” and requires potential 

controlling owners to receive regulatory approval for changes in control. The 

Form A Statement of the aforementioned related regulation provides for 

extensive disclosure and attestation regarding the acquiring party’s intention 

to control and ability to meet regulatory standards for acquiring such control. 
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The Model Holding Company Act requires that the domestic state insurance 

department must be notified of major transactions with affiliated entities 

which could include material portfolio transfers between related parties. 

Assumption reinsurance and bulk reinsurance statutes establish thresholds by 

which material transfers of all or most of an insurer’s business either in total 

or within a specific line of business are subject to review and approval. 

FRB: As discussed in the response to ICP 1 (above), the FRB has 

supervisory authority over BHCs, SLHCs, state member banks, certain FBOs, 

and nonbank financial companies. The FRB is the consolidated supervisor of 

BHCs, SLHCs, FBOs, and nonbank financial companies and regulates their 

operations and activities, including, in most cases, their acquisition of 

insurance companies or agencies. In some cases, an SLHC or BHC, for 

example, must obtain the FRB’s prior approval before it may acquire an 

insurance company. See, e.g., 12 U.S.C. §§ 1843 and 1467a(c). 

With respect to the control of BHCs and SLHCs, four federal statutes (and 

their implementing regulations) define significant ownership and controlling 

interest. They address proposed changes in ownership, control, or structure of 

banks. In each instance, the circumstances triggering the need for 

authorization are clear.

The U.S. federal banking agencies have statutory authority under the CIBC 

Act, 12 U.S.C. § 1817(j), to review, reject, and impose conditions on 

proposals involving significant changes in ownership or control of banks or 

savings associations. In general, prior authorization by the appropriate federal 

banking agency is required for any person to acquire “control” of a bank or 

savings association. “Control” for this purpose is defined as “the power, 

directly or indirectly, to direct the management or policies of an insured 

depository institution or to vote 25 per centum or more of any class of voting 

securities of an insured depository institution.” 12 U.S.C. § 1817(j)(8)(B). A 

“person” for purposes of the CIBC Act includes an individual, a group of 

individuals acting in concert, or certain entities (e.g., corporations, 

partnerships, trusts) that own shares of banks or savings associations but that 

does not meet the definition of a BHC or SLHC. The agencies have authority 

to reject, or impose conditions on, proposed acquisitions based upon criteria 

enumerated in the CIBC Act.

In general, prior authorization of the FRB is required under section 3 of the 

BHC Act for a company to directly or indirectly acquire control of a bank or 

BHC. 12 U.S.C. § 1842(a). “Control” for this purpose generally includes 

direct or indirect ownership, control, or the power to vote 25 percent or more 

of any class of voting securities of a bank or BHC. “Control” is further 

defined to include (a) control over the election of a majority of directors (or 
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persons exercising similar functions) or (b) the power to exercise directly or 

indirectly a controlling influence over the management or policies of the bank 

or BHC. See 12 CFR 225.2(e)(1). For existing BHCs, FRB authorization is 

required before the BHC can acquire, directly or indirectly, 5 percent or more 

of any class of voting shares of another bank. See 12 U.S.C. § 1842(a)(3). 

The acquisition of control of a nonbank financial company is also subject to 

section 3 of the BHC Act as if the nonbank financial company were a BHC. 

See 12 U.S.C. § 5363(a).

Prior authorization of the Federal Reserve is required under HOLA for a 

company directly or indirectly to acquire control of a savings association or an 

SLHC. See 12 U.S.C. § 1467a(e). The definition of “control” under HOLA is 

similar to the BHC Act definition of control. In addition, subject to statutorily 

enumerated exceptions, FRB approval is required before an SLHC can 

acquire, directly or indirectly, more than 5 percent of a class of voting 

securities of another savings association or SLHC. See 12 U.S.C. § 

1467a(e)(1)(A)(iii). 

Under section 163(b) of the Dodd-Frank Act, certain BHCs and any nonbank 

financial company must provide prior notice to the Board for approval before 

acquiring the shares of entities engaged in the activities described in section 

4(k) of the BHC Act—such as insurance and providing investment advisory 

services—and that have total consolidated assets of $10 billion or more. 

12 U.S.C. § 5363(b).

6.1 The term “control” over an insurer is defined in legislation and it 

addresses, at a minimum: 

 holding of a defined number or percentage of issued shares or 

financial instruments (such as compulsory convertible debentures) 

above a designated threshold in an insurer or its intermediate or 

ultimate beneficial owner; 

 voting rights attached to the aforementioned shares or financial 

instruments; 

 power to appoint directors to the board and other executive 

committees or remove them.

6.1 States: The Model Holding Company Act includes a broad definition of 

control encompassing the three bullet points of the standard. Control shall be 

presumed to exist if any person directly or indirectly owns, controls, holds 

with the power to vote, or holds proxies representing 10 percent or more of the 
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voting securities of any other person.

FRB: As is discussed in ICP 6 (above), the term “control” is defined under 

the CIBC Act, BHC Act, HOLA, and the related implementing regulations 

and includes provisions concerning limits on equity ownership before control 

is formed, voting and nonvoting equity interests, and the power to appoint 

directors (and other indicia of controlling influence).

6.2 The supervisor requires the insurer to provide notification of any 

proposed acquisitions or changes in control of the insurer. The supervisor 

grants or denies approval to person(s) (legal or natural) that want(s) to 

acquire significant ownership or a controlling interest in an insurer, 

whether directly or indirectly, alone or with an associate.

6.2 States: The language in the Model Holding Company Act requires the 

acquiring person to file a pre-acquisition notification with the insurance 

commissioner. The supervisor grants or denies approval to persons seeking to 

acquire significant ownership or a controlling interest.

FRB: As is discussed in ICP 6 (above), in certain instances U.S. federal 

banking statutes and the related regulations require the FRB’s prior approval 

or notice before a BHC, SLHC, nonbank financial company, or state member 

bank acquires control of an insurance company. See, e.g., 12 U.S.C. §§ 1843 

and 1467a(c). The FRB is also involved in the change in control of an 

insurance company that owns or controls a depository institution such as a 

bank. See, e.g., 12 U.S.C. §§ 1842 and 1467a(e). The FRB is not otherwise 

involved in the acquisition of control an insurance company.

6.3 The supervisor approves any significant increase above the 

predetermined control levels in an insurer by person(s) (legal or natural), 

whether obtained individually or in association with others. This also 

applies to any other interest in that insurer or its intermediate or ultimate 

beneficial owners. The supervisor requires appropriate notification from 

insurers in the case of a significant decrease below the predetermined 

control levels.

6.3 States: The supervisor approves any significant increase above the 

predetermined control levels, whether obtained individually or in association 

with others. Pursuant to the Model Holding Company Act, any controlling 

person seeking to divest its controlling interest in the insurer must file a 

confidential notice of its proposed divestiture at least 30 days prior to the 
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cessation of control.

FRB: As is discussed in ICP 6 (above), in certain instances U.S. federal 

banking statutes and the related regulations implementing them require the 

FRB’s prior approval or notice before a BHC, SLHC, nonbank financial 

company, or state member bank acquires control of an insurance company. 

See, e.g., 12 U.S.C. §§ 1843 and 1467a(c). Once a BHC, SLHC, state 

member bank, or nonbank financial company has received FRB approval or 

non-objection to acquire control of an insurance company, it may acquire any 

additional amount of the securities of that entity without prior approval, unless 

the FRB has otherwise conditioned past approvals or non-objections on the 

future notice or approval of subsequent further acquisitions. The FRB is also 

involved in the change in control or any significant increase above the 

predetermined control levels of an insurance company that owns or controls a 

depository institution such as a bank. See, e.g., 12 U.S.C. §§ 1842 and 

1467a(e). 

6.4 The requirements in Standards 6.2 and 6.3 above also refer to the 

acquisition or change of control where the intermediate or ultimate 

beneficial owner(s) of an insurer is (are) outside the jurisdiction where 

the insurer is incorporated. In such cases, the supervisor coordinates, 

where relevant and necessary, with corresponding supervisors of those 

entities.

6.4 States: In cases where outside jurisdictions are involved, the domestic 

supervisor collaborates and coordinates, where relevant and necessary, with 

corresponding supervisors of those persons/entities.

FRB: The FRB coordinates with the primary foreign supervisor(s) of the 

entities it supervises, as necessary.

6.5 The supervisor is satisfied that those seeking control meet the same 

criteria as they would be required to meet if they sought a new licence.

6.5 States: The supervisor will not approve the acquisition of control if the 

applicant (after the change of control) would not be able to satisfy the 

requirements for the issuance of a license to write the line or lines of insurance 

for which it is seeking approval. See Section 3D(1)(a) of Model Holding 

Company Act.

FRB: The FRB is not a licensing authority for insurance companies. 
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Licensing of insurance companies occurs at the state level.

6.6 The supervisor requires insurers to provide appropriate information on 

their shareholders and any other person directly or indirectly exercising 

control.

6.6 States: The Model Holding Company Act requires the acquiring party to 

provide significant information, provided under oath or affirmation, including 

but not limited to listing all offices and positions held during the past 5 years, 

any conviction of crimes, source nature and amount of the consideration used, 

and other pertinent information. See Section 3B of the Model Holding 

Company Act.

FRB: The FRB may require a BHC, SLHC, state member bank, nonbank 

financial company, and other supervised entities to provide appropriate 

information on its shareholders and others exercising control.

6.7 The supervisor rejects applications of proposed owners to control 

insurers if facts exist from which it can be reasonably deduced that their 

ownership will be unduly prejudicial to policyholders. The supervisor is 

able to identify the intended beneficial owner.

6.7 States: The supervisor will not approve the acquisition of control if the 

financial condition of any acquiring party is such as might jeopardize the 

financial stability of the insurer, or prejudice the interest of its policyholders.

See Section 3D(1)(c) of the Model Holding Company Act.

FRB: The FRB’s review of applications and notices to acquire control of an 

insurance company or of an entity that controls an insurance company—such 

as a BHC, SLHC, or state member bank—is based on certain factors 

prescribed by federal statutes. See, e.g., 12 U.S.C. §§ 1843 and 1467a(c). 

Generally speaking, the FRB’s review is focused on the safety and soundness 

of the banking organization and the impact that the acquisition may have on 

the future prospects of the organization as a whole. The FRB will often seek 

comment from or coordinate review of a proposal with state insurance 

regulators who may review whether an acquisition will be unduly prejudicial 

to policyholders.

In any application or notice to acquire control of an entity supervised by the 

FRB—such as a BHC, SLHC, or state member bank—the FRB closely 

reviews the proposed ownership structure including the identity of all owners, 

including beneficial owners. In the case of an acquisition by a BHC, SLHC, 
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state member bank, or nonbank financial company of an insurance company, 

the FRB is already informed of the ownership of the supervised entity, but 

may inquire further as necessary.

6.8 To assess applications for proposed acquisitions or changes in control of 

insurers the supervisor establishes requirements for financial and nonfinancial resources.

6.8 States: As part of the evaluation of any application for a change in control, 

the supervisor establishes requirements for financial and non-financial 

resources dependent on the business plan submitted and ultimately accepted 

by the supervisor.

FRB: The FRB’s review of applications and notices to acquire control of an 

insurance company or of an entity that controls an insurance company—such 

as a BHC, SLHC, or state member bank—is based on certain factors 

prescribed by federal statutes. See, e.g., 12 U.S.C. §§ 1843 and 1467a(c). 

Generally speaking, the FRB’s review is focused on the safety and soundness 

of the banking organization and the impact that the acquisition may have on 

the future prospects of the organization as a whole. The statutory factors the 

FRB is required to consider typically include an assessment of the financial 

and non-financial resources of the supervised entity that proposes to acquire 

an insurance company (see, e.g., 12 U.S.C. §§ 1843 and 1467a(c)).

In any application or notice to acquire control of an entity supervised by the 

FRB—such as a BHC, SLHC, state member bank—the FRB closely reviews 

the financial and non-financial resources—such as managerial resources—of 

the entity that proposes to acquire the BHC, SLHC, or state member bank.

See, e.g., 12 U.S.C. §§ 1842 and 1467a(e).

6.9 A change of a mutual company to a stock company, or vice versa, is 

subject to the supervisor’s approval. The supervisor satisfies itself with 

the new constitution or governing organisational document of the 

company before giving approval.

6.9 States: Pursuant to state laws that permit demutualization, a change of a 

mutual company to a stock company is subject to the supervisor’s approval, 

and is subject to a comprehensive review of its proposed legal structure, 

including organizational documents, and financial projections.

FRB: The conversion from mutual-to-stock form of a mutual BHC or SLHC 
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is subject to the prior approval of the FRB (and may also be subject to 

approval by state regulators). See, e.g., 12 CFR Part 239, subpart E. The 

formation of a new, stock-based holding company would require the prior 

approval of the FRB, as that newly-formed holding company would be a BHC 

or SLHC. 

6.10 The transfer of all or a part of an insurer’s business is subject to approval 

by the supervisor, taking into account, amongst other things, the financial 

position of the transferee and the transferor. The supervisor satisfies 

itself that the interests of the policyholders of both the transferee and 

transferor will be protected.

6.10 States: The transfer of all or a part of an insurer’s business is subject to 

supervisor approval. As part of the review process, the supervisor will ensure 

that the interests of the policyholders of both parties are not adversely 

impacted.

FRB: As is discussed in ICP 6 (above), in certain instances U.S. federal 

banking statutes and the related regulations require the FRB’s prior approval 

or notice before a BHC, SLHC, nonbank financial company, or state member 

bank acquires control of an insurance company. See, e.g., 12 U.S.C. §§ 1843 

and 1467a(c). Under section 163(b) of the Dodd-Frank Act, certain BHCs and 

any nonbank financial company must provide prior notice to the Board for 

approval before acquiring the shares of entities engaged in the activities 

described in section 4(k) of the BHC Act—including insurance—and that 

have total consolidated assets of $10 billion or more. 12 U.S.C. § 5363(b). 

Unless the acquiring entity is an entity supervised by the FRB, the transfer of 

all or part of an insurance company’s business would otherwise only be 

subject to approval at the state level.

ICP 7 Corporate Governance

7 The supervisor requires insurers to establish and implement a corporate 

governance framework which provides for sound and prudent 

management and oversight of the insurer’s business and adequately 

recognises and protects the interests of policyholders.

7 States: Criteria regarding corporate governance issues are dispersed 

throughout state insurance and commercial codes through statute, regulation 

and administrative orders. In general, the U.S. insurance supervisory 

approach for corporate governance of insurers is based upon a proportionality 
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principle. Under this principle, larger and more complex entities are subject 

to more stringent requirements in the application of corporate governance 

standards.

U.S. insurance supervisors review compliance with many of the corporate 

governance criteria at the licensing stage for new insurers and producers, in 

requiring and reviewing annual statements, in conducting periodic financial 

and market condition reviews, in approving mergers or other changes of 

control involving domestic insurers, and in applying solvency oversight.

Another way that U.S. insurance supervisors address many of the corporate 

governance criteria is through conducting on-site inspections. The NAIC 

Financial Condition Examiners Handbook recognizes corporate governance 

assessment as a critical step in planning an effective financial examination. In 

order to complete an examination under the risk-focused surveillance 

approach, examiners must consider and evaluate the insurer’s corporate 

governance and established risk management processes. By understanding the 

corporate governance structure the examiner will obtain information on the 

quality of guidance and oversight provided by the Board and the effectiveness 

of management. Recently, as a result of Solvency Modernization Initiative 

efforts, the United States has developed additional guidance for regulator use 

in these areas. 

In addition, as aforementioned the Corporate Governance Annual Disclosure 

Model Act and accompanying Corporate Governance Annual Disclosure 

Model Regulation was adopted at the NAIC Corporate Governance Working 

Group at the Summer 2014 National Meeting. This model law and supporting 

regulation will require insurers to report detailed information on governance 

practices on an annual basis. As this information is intended to be reported to 

regulators starting in 2016, additional regulatory guidance will be added into 

the analysis and examination handbooks and manuals to explain how this 

information may be used in the regulatory assessment process.

FRB: The FRB has a supervisory program that establishes and implements a 

corporate governance framework for institutions under its jurisdiction and 

continues to adapt an existing framework to account for the unique 

characteristics of insurance companies. Corporate governance expectations 

for all Federal Reserve-supervised firms with assets over $50 billion were 

detailed as part of consolidated supervision framework guidance issued in 

2012. See SR 12-17, available at

http://www.federalreserve.gov/bankinforeg/srletters/sr1217.htm. This 

guidance supports a tailored approach that accounts for the unique risk 

characteristics of each firm. The guidance embodied in SR 12-17 covers core 
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areas of supervisory focus. The guidance specifies the Federal Reserve’s 

expectations around two main areas: 1) enhancing the resiliency of a firm that 

includes guidance on capital and liquidity planning and positions; corporate 

governance; recovery planning; and management of core business lines, and 

2) reducing the impact of a firm’s failure that includes guidance on 

management of critical operations; support for banking offices; resolution 

planning; and additional macroprudential supervisory approaches to address 

risk to financial stability. 

The FRB has conducted targeted reviews of corporate governance at 

supervised entities.

7.1 The supervisor requires the insurer’s Board to set and oversee the 

implementation of the insurer’s business objectives and strategies for 

achieving those objectives, including its risk strategy and risk appetite, in 

line with the insurer’s long term interests and viability.

7.1 States: Current law sets requirements for the legal duties of individual Board 

members (e.g., duty of care, duty of loyalty, etc.); there are additional 

expectations for Board involvement as outlined in the Examiners Handbook. 

In relation to the Board’s role in overseeing risk strategy and risk appetite, the 

NAIC adopted the Risk Management and Own Risk and Solvency Assessment 

Model Act (RMORSA Model Act #505) in 2013 to outline expectations for 

insurers in this area. As a result of these new developments, large insurers 

will be required to provide detailed information regarding Board oversight of 

risk management practices through the filing of an ORSA Summary Report as 

early as 2015. Also, it is anticipated that all insurers will be required to 

disclose the Board’s role in risk management oversight through a Corporate 

Governance Annual Disclosure beginning as early as 2016. 

In addition, publicly-held insurers are subject to SEC requirements holding 

the Board accountable for internal control within the company to assure that 

legal compliance is achieved as set forth under the Sarbanes-Oxley Act of 

2002.

FRB: Please see the FRB’s publicly available guidance contained in SR 12-

17, December 17, 2012 (2.a: Corporate Governance), which states, in part: 

In order for a firm to be sustainable under a broad range of economic, 

operational, legal or other stresses, its board of directors...should 

provide effective corporate governance with support of senior 

management. The board is expected to establish and maintain the 

firm’s culture, incentives, structure, and processes that promote its 
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compliance with laws, regulations, and supervisory guidance. Each 

firm’s board of directors and committees, with support from senior 

management, should: 

a) Maintain a clearly articulated corporate strategy and institutional 

risk appetite. The board should set direction and oversight for revenue 

and profit generation, risk management and control functions, and 

other areas essential to sustaining the consolidated organization.

7.2 The supervisor requires the insurer’s Board to: 

 ensure that the roles and responsibilities allocated to the Board, 

Senior Management and Key Persons in Control Functions are clearly 

defined so as to promote an appropriate separation of the oversight

function from the management responsibilities; and 

 provide adequate oversight of the Senior Management.

7.2 States: State corporate law broadly defines the roles and responsibilities of 

the Board. Guidance in the analysis and examination handbooks provides an 

overview of appropriate roles and responsibilities in these areas. There are 

also some requirements included in legislation in this area, including a 

requirement for the appointed actuary to present results to the Board (P&C) 

and for the external auditor to present results to the audit committee. 

An assessment of how roles and responsibilities have been allocated is 

regularly performed during on-site examinations, even if there are no 

supervisory concerns, and concerns are referred to off-site monitoring 

(analysis) for review and follow-up.

FRB: The primary supervisors of insurance companies are the individual 

states in which insurance companies are licensed or operate. With certain 

limited exceptions, the direct regulation of activities and operations of 

insurance companies, including corporate governance, is conducted at the 

state level. The FRB may, however, play a more active role in the supervision 

of management of an insurance company that also controls a bank or savings 

association (i.e., a BHC or SLHC that also is an insurance company). As 

noted in ICP 7, above, the expectations outlined in SR 12-17 apply to all 

Federal Reserve supervised firms that meet the relevant size threshold.
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7.3 The supervisor requires the insurer’s Board to have, on an on-going 

basis: 

 an appropriate number and mix of individuals to ensure that there is 

an overall adequate level of knowledge, skills and expertise at the 

Board level commensurate with the governance structure and the 

nature, scale and complexity of the insurer’s business; 

 appropriate internal governance practices and procedures to support 

the work of the Board in a manner that promotes the efficient, 

objective and independent judgment and decision making by the 

Board; and 

 adequate powers and resources to be able to discharge its duties fully 

and effectively.

7.3 States: Existing legislation with regard to Boards focuses on an individual 

board member’s legal duties. There is some high-level guidance included in 

the handbooks which communicate expectations of the Board as a whole.

Some of the areas outlined in the NAIC Financial Condition Examiners 

Handbook to be considered in the assessment of the Board include:

 Membership criteria and terms;

 Knowledge and experience of directors;

 Independence from management;

 Extent of monitoring and oversight of management activities;

 Sufficiency of Board committees, in subject matter and membership;

 Oversight in determining the compensation of executive officers and 

the appointment and termination of those individuals;

 Sufficiency and timeliness of information provided to the Board; and

 The Board’s role in establishing the appropriate “tone at the top” 

including the development and enforcement of a code of conduct.

FRB: The guidance embodied in SR 12-17 (2.b: Corporate Governance) 

states, in part: “Ensure that the firm’s senior management has the expertise 

and level of involvement required to manage the firm’s core business lines, 

critical operations, banking [insurance] offices, and other material entities. 

These areas should receive sufficient operational support to remain in a safe 
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and sound condition under a broad range of stressed conditions.”

7.4 The supervisor requires the individual members of the Board to: 

 act in good faith, honestly and reasonably; 

 exercise due care and diligence; 

 act in the best interests of the insurer and policyholders, putting those 

interests of the insurer and policyholders ahead of his/her own 

interests; 

 exercise independent judgment and objectivity in his/her decision 

making, taking due account of the interests of the insurer and 

policyholders; and 

 not use his/her position to gain undue personal advantage or cause 

any detriment to the insurer.

7.4 States: These requirements are generally spelled out in state corporate law 

and further interpreted through case law.

Disclosures are required to be included in the annual reports regarding 

whether the board and management are maintaining the appropriate ethical 

standards and properly managing conflicts of interest. In addition, beginning 

in 2016, insurers will be required to provide additional information regarding 

how directors fulfill their oversight obligations through the completion of the 

Corporate Governance Annual Disclosure. 

Publicly-held insurers are subject to SEC requirements holding board 

members accountable for their actions under the Sarbanes-Oxley Act of 2002. 

Directors are responsible for their behavior in meeting the ethics standards set 

forth in the Act.

FRB: The guidance embodied in SR 12-17 (2.c: Corporate Governance) 

states in part: “Maintain a corporate culture that emphasizes the importance 

of compliance with laws and regulations and consumer protection, as well as 

the avoidance of conflicts of interest and the management of reputational and 

legal risks.”

7.5 The supervisor requires the insurer’s Board to provide oversight in 

respect of the design and implementation of sound risk management and 

internal control systems and functions.
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7.5 States: Assessment of the Board’s oversight in respect of the design and 

implementation of sound risk management and internal control systems and 

functions is a standard part of on-site financial exams and may be extended to 

follow-up during financial analysis if required. Once ORSA reports are 

available, the review in this area will be even more extensive. Additionally, 

the Model Holding Company Act provides some general coverage in this 

respect, and there is guidance in the handbooks addressing best practices in 

these areas. In addition to a review of the governance structure during the 

financial examination, the Model Holding Company Act requires entities to 

disclose in their annual Form B filing a statement with respect to the board of 

directors oversight over governance and controls. See also States’ response to 

ICP 8 (regarding Model Audit Rule). 

FRB: The guidance embodied in SR 12-17 (2.d: Corporate Governance) 

states in part: “Ensure the organization’s internal audit, corporate compliance, 

and risk management and internal control functions are effective and 

independent, with demonstrated influence over business-line decision making 

that is not marginalized by a focus on short-term revenue generation over 

long-term sustainability.”

7.6 The supervisor requires the insurer’s Board to: 

 adopt and oversee the effective implementation of a remuneration 

policy, which does not induce excessive or inappropriate risk taking, is 

in line with the identified risk appetite and long term interests of the 

insurer, and has proper regard to the interests of its stakeholders; and 

 ensure that such a remuneration policy, at a minimum, covers those 

individuals who are members of the Board, Senior Management, Key 

Persons in Control Functions and other employees whose actions may 

have a material impact on the risk exposure of the insurer (major 

risk–taking staff).

7.6 States: Insurers are required to disclose annual compensation information on 

the most highly compensated executives to regulators through the 

Supplemental Compensation Exhibit. Additionally, compensation may be 

reviewed during the financial examination process. As early as 2016, the 

Corporate Governance Annual Disclosure will require insurers to describe the 

general objectives of significant compensation programs and what the 

programs are designed to reward. The description shall include sufficient 

detail to allow the commissioner to understand how the organization ensures 

that compensation programs do not encourage and/or reward excessive risk 

taking.
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For publicly-held insurers, the SEC mandates a number of disclosure 

requirements including information on executive salaries, information on 

stock awards, information on how compensation relates to risk and the 

Board’s role in overseeing executive compensation. 

Additional rules to be applied to publicly-held insurers under the Dodd-Frank 

Act require a shareholder vote on compensation, a fully independent 

compensation committee, additional executive compensation disclosures and 

the recovery of improperly awarded compensation.

FRB: The guidance embodied in SR 12-17 (2.e: Corporate Governance) 

states, in part: “Assign senior managers with the responsibility for ensuring 

that investments across business lines and operations align with corporate 

strategies, and that compensation arrangements and other incentives are 

consistent with corporate culture and institutional risk appetite.”

7.7 The supervisor requires the insurer’s Board to ensure there is a reliable 

financial reporting process for both public and supervisory purposes 

which is supported by clearly defined roles and responsibilities of the 

Board, Senior Management and the external auditor.

7.7 States: Extensive financial reporting is required under U.S. insurance 

regulation through a process that provides information to the public and 

regulator based on applicability. Additional reporting standards are placed on 

publicly-traded companies by the SEC.

The Annual Financial Reporting Model Regulation (Model Audit Rule #205) 

outlines requirements for companies relating to internal controls over financial 

reporting. Additionally, reporting requirements in this area are reviewed by 

financial analysis; supporting work is reviewed and utilized during onsite 

exams.

The Model Holding Company Act and its accompanying Regulation require 

an annual Form B and Form F filing which require, among other things, 

financial statements of the ultimate controlling entity and information on 

group-wide enterprise/contagion risk (including an annual group business 

plan) respectively. 

The NAIC adopted the RMORSA Model Act in 2013. As of June 2014, 18 

states have adopted such legislation. As a result, an annual Own Risk and 

Solvency Assessment Summary Report will be required annually for 

companies and groups domiciled in those states with annual premium greater 
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than $500 million and $1 billion respectively. 

FRB: The guidance embodied in SR 12-17 (2.d: Corporate Governance) 

states, in part: “Ensure the organization’s internal audit, corporate 

compliance, and risk management and internal control functions are effective 

and independent, with demonstrated influence over business-line decision 

making that is not marginalized by a focus on short-term revenue generation 

over long-term sustainability.”

7.8 The supervisor requires the insurer’s Board to have systems and controls 

to ensure the promotion of appropriate, timely and effective 

communications with the supervisor and relevant stakeholders on the 

governance of the insurer.

7.8 States: Information on corporate governance and the role of the board is 

subject to review during an onsite examination. Financial information is 

subject to an annual audit that is made available to the public. Some 

information on insurer governance is made publicly available through the 

Annual Statement and through Exam Reports. The requirement to report on 

governance practices through the Corporate Governance Annual Disclosure 

may begin as early as 2016 for insurers in states that have adopted the 

Corporate Governance Annual Disclosure Model Act, which will provide 

additional information to regulators in these areas.

In addition, publicly held insurers are required by the SEC to file a public 

proxy statement providing detailed information on the corporate governance 

practices of these insurers. 

FRB: The guidance embodied in SR 12-17 (2.f: Corporate Governance) 

which states, in part: “Ensure that management information systems (MIS) 

support the responsibilities of the board of directors to oversee the firm’s core 

business lines, critical operations, and other core areas of supervisory focus.”

7.9 The supervisor requires the insurer’s Board to have appropriate policies 

and procedures to ensure that Senior Management: 

 carries out the day-to-day operations of the insurer effectively and in 

accordance with the insurer’s strategies, policies and procedures; 

 promotes a culture of sound risk management, compliance and fair 

treatment of customers; 

 provides the Board adequate and timely information to enable the 

Board to carry out its duties and functions including the monitoring 
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and review of the performance and risk exposures of the insurer, and 

the performance of Senior Management; and 

 provides to the relevant stakeholders and the supervisor the 

information required to satisfy the legal and other obligations 

applicable to the insurer or Senior Management.

7.9 States: The Model Holding Company Act requires entities to disclose in their 

annual Form B filing a statement with respect to the board of directors 

oversight over governance and controls.

State corporate law generally outlines responsibilities of the Board, but allows 

the Board to delegate certain activities to Senior Management. Additional 

guidance/expectations in this area are outlined in the handbooks. 

The role of Senior Management is typically reviewed extensively on each 

examination, with concerns targeted for follow-up review during the analysis 

process. An assessment of Senior Management may be determined through 

discussions with management and by reviewing the organizational structure, 

assignment of authority and adherence to internal controls in place at the 

company. Some of the areas outlined in the Examiners Handbook to be 

considered in the assessment of Senior Management include:

 Knowledge and experience of management;

 Turnover in key management positions;

 The nature of business risks accepted and the company’s risk 

assessment processes;

 Access to adequate financial and operating information to identify 

trends or variations from budgets;

 Attitudes and actions towards financial reporting and internal controls; 

and

 Management’s role in developing, communicating and enforcing a 

code of conduct.

Disclosures are required to be included in the annual reports regarding 

whether the board and management are maintaining the appropriate ethical 

standards and properly managing conflicts of interest. The requirement to 
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report on governance practices through the Corporate Governance Annual 

Disclosure Model Act may begin as early as 2016 for insurers domiciled in 

states that have adopted the Corporate Governance Annual Disclosure Model 

Act, which will provide additional information to regulators in these areas.

Publicly-held insurers are subject to SEC requirements holding senior 

management accountable for their actions under the Sarbanes-Oxley Act of 

2002. Officers are responsible for their behavior in meeting the ethics 

standards set forth in the Act and disclosures relating to the entity’s Code of 

Ethics are required.

FRB: As is discussed in ICP/Std. 7.2 (above), the primary supervisors of 

insurance companies are the individual states in which insurance companies 

are licensed or operate. The direct regulation of activities and operations of 

insurance companies, including corporate governance, is conducted at the 

state level. The FRB may, however, play a more active role in the supervision 

of management of an insurance company that also controls a bank or savings 

association (i.e., a BHC or SLHC that is also an insurance company). As 

noted in ICP 7, above, the expectations outlined in SR 12-17 apply to all 

Federal Reserve supervised firms that meet the relevant size threshold.

7.10 The supervisor has the power to require the insurer to demonstrate the 

adequacy and effectiveness of its corporate governance framework.

7.10 States: Corporate governance practices of insurers are reviewed during onsite examinations and off-site analysis work. If deficiencies are identified, the 

regulator may adjust its ongoing monitoring plan and recommend that the 

insurer take steps to correct the problems identified. 

The NAIC’s Hazardous Financial Condition Model Regulation (#385) lists 

standards (mostly financial in nature) that can be utilized in determining 

whether a company is in a hazardous financial condition. If a company is 

determined to be in such a condition, the insurer can be required to “correct 

corporate governance practice deficiencies, and adopt and utilize governance 

practices acceptable to the commissioner.” This particular standard has been 

adopted by a majority of state insurance departments and is currently under 

consideration to be adopted as a required element of the NAIC Accreditation 

Program.

FRB: As is discussed in ICP/Std. 7.2 (above), the primary supervisors of 

insurance companies are the individual states in which insurance companies 

are licensed or operate. With certain limited exceptions, the direct regulation 

of activities and operations of insurance companies, including corporate 
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governance, is conducted at the state level. The FRB may, however, play a 

more active role in the supervision of management of an insurance company 

that also controls a bank or savings association (i.e., a BHC or SLHC that is 

also an insurance company). As noted in ICP 7, above, the expectations 

outlined in SR 12-17 apply to all Federal Reserve supervised firms that meet 

the relevant size threshold.

ICP 8 Risk Management and Internal Controls

8 The supervisor requires an insurer to have, as part of its overall 

corporate governance framework, effective systems of risk management 

and internal controls, including effective functions for risk management, 

compliance, actuarial matters, and internal audit.

8 States: Internal control standards and requirements are dispersed throughout 

state insurance codes through statutes, regulations and administrative orders. 

SEC rules for public companies and similar regulatory requirements for all 

insurers exceeding an annual premium threshold are required to provide a 

report on internal controls. Additionally, all insurance entities are required to 

receive an annual audit in accordance with the Model Audit Rule #205. An 

important aspect of each audit, as required by the American Institute of 

Certified Public Accountants and Public Company Accounting Oversight 

Board (PCAOB) as related to public registrants, is to understand and assess an 

entity’s internal controls. When material weaknesses in an insurers internal 

control processes are identified during an audit, this model regulation requires 

the weaknesses to be reported to the insurance supervisor for further review.

In addition to requiring annual statutory audits, the on-site inspection process 

is critical in evaluating the internal control processes in place. The NAIC 

Financial Condition Examiners Handbook (Examiners Handbook) states that 

risk mitigation strategies/controls are generally based on five overarching 

principles, which are applicable to all critical activities of an insurer. 

Compliance with the Examiners Handbook is required under the Accreditation 

Program. These principles include:

1. An active board and senior management oversight;

2. Adequate risk management, monitoring and management information 

systems;
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3. Adequate and clear policies, authorization limits and procedures;

4. Comprehensive internal controls; and

5. Processes to assure compliance with laws and regulations.

After risks have been identified through the examination process, the 

examiner is required to identify and assess the internal control processes that 

can mitigate each identified risk. Controls are assessed by considering both 

their design and operating effectiveness. When weaknesses in the company’s 

internal controls are identified during the assessment process, the company is 

asked to make corrections to its processes and the supervisor adjusts its 

ongoing solvency monitoring of the insurer accordingly. Through increasing 

reporting requirements, increasing the frequency of examinations, and other 

means, the regulator can provide a strong incentive for the insurer to improve 

internal control weaknesses. In situations where an insurer is deemed to be in 

a hazardous financial condition, the insurer can be ordered to correct the 

situation as outlined in the Hazardous Financial Condition Model Regulation 

(#385), which is a required model regulation under the Accreditation Program. 

Recently, as a result of Solvency Modernization Initiative efforts, the United 

States has developed additional guidance for regulator use in these areas. 

As aforementioned, the NAIC has adopted a new model law and supporting 

regulation that will require insurers to report detailed information on 

governance practices relating to internal controls and risk management on an 

annual basis (see Corporate Governance Annual Disclosure Model Act). As 

this information may be reported to regulators as early as 2016 for insurers 

domiciled in states that have adopted the model, additional guidance will be 

added into regulatory handbooks and manuals to explain how this information 

may be used in the assessment process.

In relation to effective systems of risk management, the NAIC adopted the 

Risk Management and Own Risk and Solvency Assessment Model Act 

(RMORSA Model Act #505) in 2013 to outline requirements and expectations 

for large insurers in this area. As of June 2014, 18 states have adopted such 

legislation. As a result of these new developments, large insurers domiciled in 

states that have adopted the model may be required to provide detailed 

information regarding practices in this area through the filing of an ORSA 

Summary Report beginning as early as 2015. In addition, the risk 

management systems of insurers not subject to Model Act #505 are subject to 

review and assessment during onsite examination activities to ensure a 

minimum level of effectiveness in this area. 

FRB: The FRB has a supervisory program that establishes and implements a 
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framework for assessing risk management and internal controls at institutions 

under its jurisdiction. 

Supervisory guidance with respect to corporate governance at the largest

BHCs, SLHCs, and nonbank financial companies is set out in SR 12-17. The 

FRB assesses the condition, performance, and activities of all SLHCs and 

nonbank financial companies on a consolidated basis in a manner that is 

consistent with the Board’s established risk-based approach regarding BHC 

supervision to the greatest extent possible taking into account any unique 

characteristics of insurance SLHCs, nonbank financial companies, and the 

requirements of HOLA and the Dodd-Frank Act, respectively. See, e.g., SR 

Letter 11-11, July 21, 2011. As with BHCs, the FRB’s objective is to ensure 

that an SLHC and its non-depository subsidiaries are effectively supervised 

and can serve as a source of strength for, and do not threaten the safety and 

soundness of, its subsidiary depository institution(s).

8.1 The supervisor requires the insurer to establish, and operate within, 

effective systems of risk management and internal controls.

8.1 States: Insurers must comply with risk management standards required 

through actuarial and risk-based capital requirements and the insurer’s risk 

management function is subject to review during the financial examination 

process.

The NAIC adopted the Risk Management and Own Risk and Solvency 

Assessment Model Act (RMORSA Model Act #505) in 2013. As of June 

2014, 18 states have adopted such legislation. As a result, larger insurers 

(legal entities exceeding $500 million or groups exceeding $1 billion in annual 

premiums) domiciled in such states will be required to maintain a risk 

management framework to assist the insurer with identifying, assessing, 

monitoring, managing, and reporting on its material and relevant risks.

Internal controls over financial reporting are subject to extensive reporting 

requirements under the Model Audit Rule #205 for companies exceeding $500 

Million in annual premium. 

For publicly-held insurers, the SEC requires that information be disclosed on 

the issuer’s leadership structure, risk management practices and the Board’s 

role in overseeing risk management. In addition, internal controls over 

financial reporting are subject to extensive reporting requirements under 

Sarbanes-Oxley for all but the smallest public issuers.
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FRB: As is discussed in ICP 7, the primary supervisors of insurance 

companies are the individual states in which insurance companies are licensed 

or operate. With certain limited exceptions, the regulation and supervision of 

the operations of insurance companies, including risk management and other 

internal controls, is conducted at the state level. 

The FRB may, however, play a more active role in the supervision of 

management of an insurance company that also controls a bank or savings 

association (i.e., a BHC or SLHC that is also an insurance company).

8.2 The supervisor requires the insurer to have effective control functions 

with the necessary authority, independence, and resources.

8.2 States: The insurer’s overall control functions are reviewed and evaluated 

during the financial examination process and recommendations for 

improvements are made when deficiencies are identified. Recently, as a result 

of Solvency Modernization Initiative efforts, the United States has developed 

additional guidance for regulator use in these areas. The requirement to report 

on governance practices through the Corporate Governance Annual 

Disclosure may begin as early as 2016 for insurers domiciled in states that 

have adopted the Corporate Governance Annual Disclosure Model Act.

Insurers are required to receive financial statement audits on an annual basis. 

A required element of a financial statement audit is a general review of the 

entity’s internal controls over financial reporting. If material weaknesses in 

internal controls are identified during the audit, they are required to be 

reported to the regulator. Significant deficiencies in internal controls are 

required to be reported to the insurer’s audit committee. 

All publicly-held firms that are subject to Sarbanes-Oxley requirements, 

including those that are insurers, and larger private insurers (generally those 

with over $500 million of direct and assumed premium pursuant to the 

NAIC’s Model Audit Rule, which is an accreditation standard) are required to 

provide an attestation regarding the effectiveness of their internal controls 

over financial reporting. For publicly-held insurers, this attestation is subject 

to external auditor review. For publicly-held as well as large private insurers, 

this attestation and supporting documentation is subject to regulatory review 

during an onsite examination.FRB: With certain limited exceptions, the 

regulation and supervision of the operations of insurance companies, 

including internal controls, is conducted at the state level. The FRB may, 

however, play a more active role in the supervision of management of an 

insurance company that also controls a bank or savings association (i.e., a 
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BHC or SLHC that is also an insurance company).

8.3 The supervisor requires the insurer to have an effective risk management 

function capable of assisting the insurer to identify, assess, monitor, 

manage and report on its key risks in a timely way.

8.3 States: The NAIC Financial Condition Examiners Handbook provides 

guidance in this area to be considered in assessing the risk management 

practices of insurers (Exhibit M). The effectiveness of the risk management 

function is reviewed during each exam with concerns followed-up on through 

the analysis process.

The NAIC adopted the Risk Management and Own Risk and Solvency 

Assessment Model Act (RMORSA Model Act #505) in 2013 to outline 

expectations for insurers in this area. As a result, large insurers domiciled in 

states that have adopted the model may be required as early as 2015 to 

maintain a risk management framework to assist the insurer with identifying, 

assessing, monitoring, managing and reporting on its material and relevant 

risks.

For publicly-held insurers, the SEC requires that information be disclosed on 

the issuer’s leadership structure, risk management practices and the Board’s 

role in overseeing risk management.

FRB: With certain limited exceptions, the regulation and supervision of the 

operations of insurance companies, including risk management, is conducted 

at the state level. The FRB may, however, play a more active role in the 

supervision of management of an insurance company that also controls a bank 

or savings association (i.e., a BHC or SLHC that is also an insurance 

company).

8.4 The supervisor requires the insurer to have an effective compliance 

function capable of assisting the insurer to meet its legal and regulatory 

obligations and promote and sustain a corporate culture of compliance 

and integrity.

8.4 States: The Examination Handbook provides guidance in this area to be 

considered in assessing the compliance function of insurers – both compliance 

with laws and regulations as well as internal policies and limits. The 

effectiveness of the compliance function is reviewed during each exam with 

concerns followed-up on through the analysis process. An element of the 
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Corporate Governance Annual Disclosure process may require insurers 

domiciled in states that have adopted the model to report as early as 2016 on 

how the compliance function is effectively overseen by directors and senior 

management. 

FRB: With certain limited exceptions, the regulation and supervision of the 

operations of insurance companies, including a compliance function, is 

conducted at the state level. The FRB may, however, play a more active role 

in the supervision of management of an insurance company that also controls 

a bank or savings association (i.e., a BHC or SLHC that is also an insurance 

company).

8.5 The supervisor requires that there is an effective actuarial function 

capable of evaluating and providing advice to the insurer regarding, at a 

minimum, technical provisions, premium and pricing activities, and 

compliance with related statutory and regulatory requirements.

8.5 States: Regulators require companies to appoint a qualified actuary 

(appointed actuary) to opine on the reasonability or appropriateness of 

company reserves on an annual basis through the NAIC’s Standard Valuation 

Law (#820) and Actuarial Opinion and Memorandum Regulation (#822) for 

life insurers and through the NAIC’s Annual Statement Instructions for 

property/casualty and health insurers. Minimum qualifications for the 

appointed actuary are outlined within the regulation/instructions and 

supported by additional detail in U.S. actuarial professional standards. Each 

state insurance department is required to have actuarial resources (either 

internal or external) to review the actuarial functions of its domestic insurers,

including technical provisions, premium and pricing activities and compliance 

matters, during financial analysis and examination. NAIC accreditation 

standards require states to utilize the services of a credentialed actuary when 

examining a property and casualty insurer with long-tailed lines of business or 

a life insurer with large amounts of interest sensitive business.

FRB: The regulation and supervision of insurance actuarial functions is 

conducted at the state level. 

8.6 The supervisor requires the insurer to have an effective internal audit 

function capable of providing the Board with independent assurance in 

respect of the insurer’s governance, including its risk management and 

internal controls.
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8.6 States: Internal audit functions are reviewed during the financial examination 

and recommendations for improvement in the internal audit function are made 

when deemed appropriate. NAIC Financial Condition Examiners Handbook 

outlines the appropriate role for an internal audit function. 

In addition, as a result of recent Solvency Modernization Initiative efforts, the 

NAIC adopted revisions to its Model Audit Rule in 2014 that, when adopted 

by states, will require all large insurers domiciled in such states to maintain an 

internal audit function capable of providing independent, objective and 

reasonable assurance to the Audit committee and insurer management 

regarding the insurer’s governance, risk management, and internal controls. 

FRB: With certain limited exceptions, the regulation and supervision of the 

operations of insurance companies, including internal audit functions, is 

conducted at the state level (and in certain instances at the federal level with 

the SEC). The FRB may, however, play a more active role in the supervision 

of management of an insurance company that also controls a bank or savings 

association (i.e., a BHC or SLHC that is also an insurance company).

8.7 The supervisor requires the insurer to retain at least the same degree of 

oversight of, and accountability for, any outsourced material activity or 

function (such as a control function) as applies to non-outsourced 

activities or functions.

8.7 States: The Model Holding Company Act and Regulation (#440 & 450) 

include requirements relating to outsourcing functions to affiliates. All 

material outsourced functions are subject to review during examination. A 

number of NAIC Model Laws address the outsourcing of critical functions 

including services provided by MGAs (#225), Producers (#218), Controlling 

Producers (#325), Investment Custodians (#295 & 298) and other Third-Party 

Administrators (#90); the MGA (#225) and Controlling Producer (#325) 

models are required for Accreditation. 

FRB: With certain limited exceptions, the regulation and supervision of the 

operations of insurance companies, including a review of any outsourced 

material function, is conducted at the state level (and in certain instances at the 

federal level with the SEC). The FRB may, however, play a more active role 

in the supervision of management of an insurance company that also controls 

a bank or savings association (i.e., a BHC or SLHC that is also an insurance 

company).
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ICP 9 Supervisory Review and Reporting5

9 The supervisor takes a risk-based approach to supervision that uses both 

off-site monitoring and on-site inspections to examine the business of each 

insurer, evaluate its condition, risk profile and conduct, the quality and 

effectiveness of its corporate governance and its compliance with relevant 

legislation and supervisory requirements. The supervisor obtains the 

necessary information to conduct effective supervision of insurers and 

evaluate the insurance market. 

9 States: The system of financial surveillance advocated by the NAIC’s RiskFocused Surveillance Framework is designed to provide continuous regulatory 

oversight. The risk-focused approach requires fully coordinated efforts 

between the financial examination function (on-site - at the insurer) and the 

financial analysis function (off-site - at the department of insurance). State 

insurance regulators utilize many prioritization and analysis tools that are built 

from an insurer’s annual, quarterly, and supplemental public filings to identify 

those legal entities with the most concerning risks. Confidential and 

proprietary data are accessed through regulator only filings and via specific 

requests from the analysis and examination processes. The regulators use 

these results to schedule the order of off-site quarterly reviews as well as onsite reviews performed at least once every 3 to 5 years. Within a particular 

legal entity’s review, attention is focused on the key risk areas of all insurers 

plus those specific to the legal entity under review. These reviews typically 

include all risk areas of an insurer including, financial position and solvency 

assessment, quality of underwriting results and investment returns, an 

assessment of risks and management’s responses to them, as well as 

compliance concerns with state and federal statutes. 

FRB: The main objective of the supervisory process is to evaluate the overall 

safety and soundness of the banking and nonbanking organizations and 

includes evaluation of a broad range of risks. This evaluation includes an 

assessment of the organization’s risk management systems, financial 

condition, and compliance with applicable banking laws and regulations. 

The FRB may conduct both off-site monitoring and on-site examinations of 

designated nonbank financial companies and their subsidiaries pursuant to 

section 161(b) of Dodd-Frank Act. 12 U.S.C. § 5361(b). The FRB also has 

 

5 The ICP 9 Supervisory Review and Reporting was revised in 2011-2012 and adopted at the IAIS Annual General Meeting on 

12 October 2012. 
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authority pursuant to the BHC Act and HOLA to conduct both off-site 

monitoring and on-site inspections of BHCs and SLHCs, respectively, 

including their non-regulated subsidiaries. See 12 U.S.C. § 1844(c)(2) and 12 

U.S.C. § 1467a(b)(4). 

Effective consolidated supervision requires strong, cooperative relationships 

between the FRB and other supervisors and functional regulators. The FRB 

generally relies to the fullest extent possible on the information and 

assessments provided by other supervisors and regulators to support effective 

supervision.

9.1 The supervisor has the necessary legal authority, powers and resources to 

perform off-site monitoring and conduct on-site inspections of insurers, 

including monitoring and inspecting services and activities outsourced by 

the insurer6. The supervisor also has the power to require insurers to 

submit information necessary for supervision.

9.1 States: The NAIC Part A Accreditation standards include the requirement 

that the state insurance departments “should have the authority to examine 

companies whenever it is deemed necessary, including complete access to the 

company’s books and records and, if necessary, the records of any affiliated 

company, agent, and/or managing general agent. Such authority should 

extend not only to inspect books and records but also to examine officers, 

employees and agents of the company under oath when deemed necessary 

with respect to transactions directly or indirectly related to the company under 

examination. The NAIC Model Law on Examinations or substantially similar 

provisions shall be part of state law.” All states and the District of Columbia 

are currently accredited. 

Regarding the group, the Model Holding Company Act and Regulation is also 

an Accreditation Part A standard and Section 4B provides additional authority 

for the regulator to obtain: financial statements (including audited) from the 

entire group or any entity in the group, capital structure information, 

statements regarding corporate governance, etc. The Act includes a provision 

regarding Information of Insurers that must be obtained from other entities 

within the holding company structure: “Any person within an insurance 

holding company system subject to registration shall be required to provide 

 

6

For information on the powers required of the supervisor in general, see ICP 1 Objectives, Powers and Responsibilities 

of the Supervisor and ICP 2 Supervisor. 
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complete and accurate information to an insurer, where the information is 

reasonably necessary to enable the insurer to comply with the provisions of 

this Act.”

Further, the NAIC Financial Condition Examiners Handbook provides state 

insurance departments with guidance for monitoring and inspecting services 

and activities outsourced by insurers. 

FRB: The FRB may conduct both off-site monitoring and on-site 

examinations of nonbank financial companies and their subsidiaries pursuant 

to section 161(b) of Dodd-Frank Act. 12 U.S.C. § 5361(b). The FRB also has 

authority pursuant to the BHC Act and HOLA to conduct both off-site 

monitoring and on-site inspections of BHCs and SLHCs, respectively. See 12 

U.S.C. § 1844(c)(2) and 12 U.S.C. § 1467a(b)(4). The FRB has authority to 

conduct off-site monitoring and on-site inspections of any operations of the 

supervised holding company including non-regulated subsidiaries and 

activities outsourced by the insurance company, to the extent the activities 

relate to the control of a bank or savings association (in the case of a BHC or 

SLHC). 

Effective consolidated supervision requires strong, cooperative relationships 

between the FRB and other bank supervisors and functional regulators. The 

FRB generally relies to the fullest extent possible on the information and 

assessments provided by other supervisors and regulators to support effective 

supervision. However, the FRB has the authority to require an insurance 

company that is also an SLHC, BHC, or nonbank financial company to submit 

information necessary for supervision.

9.2 The supervisor has a documented framework for supervisory review and 

reporting which takes into account the nature, scale and complexity of 

insurers. The framework encompasses a supervisory plan7that sets 

priorities and determines the appropriate depth and level of off-site 

monitoring and on-site inspection activity. 

9.2 States: In the Risk-Focused Surveillance Cycle, the regulator in the state of 

domicile develops the ongoing supervisory plan that includes the frequency of 

exams, scope of exams, meetings with company management, follow up on 

recommendations from prior regulatory reviews, and financial analysis 

 

7 A Supervisory Plan is a tool for supervisors to determine the frequency, scope and depth of supervisory review. It 

could be generic (e.g., addressing categories or groups of insurers) or specific (addressing individual insurers).
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monitoring. These items will of course be impacted by the prioritization 

system described in ICP/Std. 9.1. This is all documented in the NAIC 

Financial Condition Examiners Handbook.

FRB: The supervisory approach is tailored to the size, complexity and risks 

of the firm. For the largest BHCs and FBOs and for the nonbank financial 

companies, the FRB uses a range of supervisory activities to maintain a 

comprehensive understanding and assessment of each firm. These include 

coordinated horizontal reviews involving the examination of several 

institutions simultaneously, encompassing firm-specific supervision and the 

development of cross-firm perspectives. Firm-specific examination and 

continuous monitoring activities are undertaken to maintain an understanding 

and assessment across the core areas of supervisory focus for each firm. 

The Federal Reserve recently created the Large Institution Supervision 

Coordinating Committee (LISCC) framework. The LISCC is a Federal 

Reserve System-wide committee, which is tasked with overseeing the 

supervision of the largest, most systemically important financial institutions in 

the United States. LISCC is comprised of senior officers representing various 

functions at the FRB and Reserve Banks, bringing an interdisciplinary and 

cross-firm perspective to the supervision of large systemically important 

financial institutions, including nonbank insurance holding companies 

designated by FSOC. This new approach to supervision fosters rigorous 

supervision of individual firms while formalizing the use of horizontal 

reviews and analyses of activities and risks across the portfolio. The approach 

promotes the evaluation of systemic risks posed by the firms through the 

evaluation of macroeconomic and financial risks, and how those risks could 

affect individual firms and the financial system collectively. The focus of 

LISCC supervision is on four priority areas: capital adequacy and capital 

planning; liquidity sufficiency and resiliency; corporate governance; and 

recovery and resolution planning. 

9.3 The supervisor has a mechanism to check periodically that its supervisory 

framework pays due attention to the evolving nature, scale and 

complexity of risks which may be posed by insurers and of risks to which 

insurers may be exposed.

9.3 States: The NAIC committee system provides multiple opportunities for this 

type of feedback and modification to incorporate changes to risks, companies, 

etc. The highly interactive process between the state of domicile regulator and 

the other regulators allows ground level dissemination of information about 

emerging risks to occur. The Financial Analysis (E) Working Group peer 
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review process fosters this type of dynamic as well, bringing in a variety of 

regulatory experts to discuss specific companies considered nationally 

significant. The Group also discusses trends in the industry, national issues, 

and reporting concerns. Also, at least three times a year, the chief financial 

regulators of the various states come together to discuss various concerns and 

national issues in a Chief Financial Regulators Forum. Issues that arise from 

all of these forums are brought to the various NAIC committee groups with 

the appropriate subject matter areas for investigation, for example the 

Financial Analysis Handbook (E) Working Group.

FRB: Supervisory plans for the largest BHCs, SLHCs, state member banks,

and nonbank financial companies are generally prepared at least annually and 

sometimes more frequently. The plans are vetted at the respective Reserve 

Bank and Federal Reserve System management committees so that emerging 

or growing risks are properly addressed.

9.4 The Supervisor: 

• establishes documented requirements for the submission of regular 

qualitative and quantitative information on a timely basis from all 

insurers licensed in its jurisdiction; 

• defines the scope, content and frequency of those reports and 

information; 

• requires more frequent and/or more detailed additional information 

on a timely basis whenever there is a need; 

• sets out the relevant principles and norms for supervisory reporting, 

in particular the accounting standards to be used; 

• requires that inaccurate reporting is corrected as soon as possible; 

and 

• requires that an external audit opinion is provided on annual financial 

statements.

9.4 States: Each state publishes a checklist regarding filings to submit to the state 

insurance department as well as to the NAIC, including whether in hard copy 

(and if so, how many copies) and/or electronic. Established deadlines exist in 

the checklist as well as in the statutory annual and quarterly statement for 

supplemental filings. The NAIC maintains a map that establishes links to the 
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various state checklists to streamline the process of accessing this information.

The scope and content of the filings are highly structured and formatted 

through the NAIC Blanks (E) Working Group process. The blank page serves 

as the template, and then instructions are adopted to help insurers provide the 

information the regulators seek. This occurs even for confidential and 

proprietary information that is filed with the state and not actually received 

and stored by the NAIC. For ad hoc requests by regulators, the request will 

specify the information needed and any format requirements. 

Structured deadlines exist for all companies without regard to solvency 

concerns. For those insurers considered potentially troubled, modifications to 

filing deadlines and frequencies are often made. For example, companies file 

an annual Risk-Based Capital (RBC) report; however, troubled companies 

often file quarterly RBC filings with the state of domicile. Similarly, while 

most companies file quarterly statutory financial statements, a troubled 

company may be required to file monthly financials. 

The financial reporting process is very structured, and the accounting baseline 

required to be used for all traditional insurers is the NAIC Accounting 

Practices and Procedures Manual (AP&P Manual). This is an entire codified 

body of accounting designed to meet the regulators’ needs for conservatism in 

the financial position and consistency in operating results. Individual state 

insurance regulators may nonetheless prescribe or permit alternative 

accounting practices, although such variances from the AP&P Manual must be 

disclosed to other regulators.

Annual and quarterly statement filings are reviewed by NAIC staff for 

consistency and reasonability errors. Additionally, financial solvency reviews 

by NAIC analysts as well as state analysts highlight errors in reporting as 

well. When errors occur, the company and regulators (if applicable) are 

notified. If the company does not voluntarily respond with corrections to the 

NAIC, the state of domicile regulator makes the ultimate decision of whether 

to require a correction currently or to allow the company to fix the issue in a 

future filing. A specific Statement of Statutory Accounting Principles covers 

changes to errors vs. changes to estimates. 

The NAIC Accreditation Part A standards includes the following: “State 

statute or regulation should contain a requirement for annual audits of 

domestic insurance companies by independent certified public accountants 

that is substantially similar to the NAIC Annual Financial Reporting Model 

Regulation.”
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FRB: Off-site surveillance is a key component of the U.S. federal banking 

agencies’ risk-focused supervisory approach. A major part of this surveillance 

consists of the collection, review, and analysis of regulatory reports required 

to be submitted to the agencies on a periodic basis by banks and savings 

associations (collectively, “banks”) and BHCs and SLHCs (collectively, 

“holding companies”). These reports capture an array of data, including 

financial, operational, prudential, activities, and structural information. As 

previously noted, the agencies’ authority to require the submission of 

information is broad, extending to affiliates of a bank or holding company and 

including information on a bank’s and holding company’s domestic and 

foreign activities and operations. The authority includes an ability to require 

the submission of reports necessary for the effective supervision of the 

particular bank or holding company or groups of organizations with similar 

operations or risks. See 12 U.S.C. §§ 161 (national banks), 324 (state member 

banks), 1464(v) (savings associations), 1467a(b) (SLHCs), 1817 (state 

nonmember banks), and 1844 (BHCs). 

The authority to collect information from banks and holding companies is 

limited by the Paperwork Reduction Act (PRA), which requires federal 

agencies to obtain approval from the Office of Management and Budget 

(OMB) prior to collecting certain information. Information may be collected: 

from fewer than 10 banks or holding companies in any manner; from any 

number of banks or holding companies within the framework of an 

examination, as a result of an action regarding a particular bank, or holding 

company; and through a public hearing or meeting, or as a brief certification 

without obtaining OMB approval. The approval process for new collections 

of information and changes to existing collections of information, such as the 

Consolidated Reports of Condition and Income (Call Report), requires 

publication of two Federal Register Notices and a submission to OMB. See

44 U.S.C. § 3501, et seq.

Title III of the Dodd-Frank Act transferred all former Office of Thrift 

Supervision (OTS) authorities (including rule-making) related to SLHCs and 

their non-depository subsidiaries to the FRB on July 21, 2011. See 12 U.S.C. 

§ 5412(b). Consequently, the FRB became responsible for the consolidated 

supervision of SLHCs beginning July 21, 2011. Among the information 

collections transferred to the Federal Reserve was the Savings Association 

Holding Company Report (H-(b)11), known as the Annual/Current Report. In 

connection with this transfer, the FRB proposed for public comment and 

subsequently adopted regulatory reporting requirements for SLHCs.

The Dodd-Frank Act provides authority to the FRB to require comprehensive 

reporting by nonbank financial companies. See 12 U.S.C. § 5361(a). Specific 
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regulatory reporting requirements are under development.

9.5 In particular, the supervisor requires insurers to report: 

• off-balance sheet exposures; 

• material outsourced functions and activities; and 

• any significant changes to their corporate governance. 

The supervisor also requires insurers to promptly report any material 

changes or incidents that could affect their condition or customers.

9.5 States: Insurers must report off-balance sheet items in the Notes to Financial 

Statements included in the legal entity statutory annual and quarterly filings. 

For example, there is a specific note for contingencies. Additionally, various 

off-balance sheet asset items are assessed capital charges in the confidential 

RBC filings. 

The first phase of the Risk-Focused Examination process is to gain an 

understanding of the company and identify key functional activities to be 

reviewed. Background information on the company will be gathered from 

various sources, including the company itself in particular. In understanding 

the company as well as the second phase, identifying and assessing inherent 

risk in activities, knowledge of the material outsourced functions and activities 

is critical. The ongoing analysis process reviews the findings from the 

examination and asks for any changes to the company. 

Corporate governance concerns are included in these examination phases as 

well. Regulators currently utilize disclosures in the annual and quarterly 

statutory statements and more importantly the information they obtain from 

the company as part of the information request for the examination process to 

obtain the understanding of the company’s governance. It will be used in 

establishing the rest of the examination process for all key functional 

activities. Similarly, the analysis process asks for any changes to this 

information. However, as aforementioned, the NAIC Corporate Governance 

(E) Working Group finalized a Model Act and supporting Regulation that will 

require insurers to disclose additional information on their corporate 

governance practices to regulators in a confidential filing on an annual basis

(see Corporate Governance Annual Disclosure Model Act and accompanying 

Regulation). When finalized and adopted by states, this additional 

information will serve as additional input for monitoring and reviewing 
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governance practices from an analysis perspective and serve as a starting point 

for future examinations.

Significant transactions must be disclosed as part of the Material Transactions 

Model Regulation. The Model Holding Company Act also requires 

significant disclosures surrounding intercompany transactions. Changes must 

be promptly filed with the domiciliary regulator. The analyst also seeks 

quarterly (or more frequently for potentially troubled insurers) input on any 

changes to the company for things that are not reported in the standardized 

reports.

FRB: The collection of financial information and other data from off-site 

surveillance referred to in the response above includes off-balance sheet 

exposures, material outsourced functions and activities, and reporting of any 

significant changes in corporate governance, as well as any material changes 

or incidents that could affect their condition or customers.

9.6 The supervisor periodically reviews its reporting requirements to 

ascertain that they still serve their intended objectives and to identify any 

gaps which need to be filled. The supervisor sets any additional 

requirements that it considers necessary for certain insurers based on 

their nature, scale and complexity. 

9.6 States: The NAIC Blanks (E) Working Group considers modifications to the 

standardized templates for the annual and quarterly statutory financial 

statements as well as the supplemental filings. Changes to the instructions 

supporting those filings are also considered; and as some of those filings are 

confidential and proprietary, they are filed with the state only and not the 

NAIC. This Working Group receives recommendations from all of the 

various subject matter expert groups in the NAIC committee structure, as well 

as directly from individual regulators or state insurance departments as well as 

consumers, other government agencies, academics and even insurers.

Regarding standardized reporting from other groups, they also have regular 

review and maintenance of the reports. In many of the reporting 

requirements, the nature, scale and complexity of the insurer is considered. 

For example, the Own Risk and Solvency Assessment (ORSA) Summary 

Report will not be required of entities under a certain size unless the 

commissioner indicates otherwise.

FRB: The FRB reviews its reporting requirements on a periodic basis to 

ascertain whether they continue to serve the intended purpose and periodically 
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sets additional requirements as appropriate.

9.7 The supervisor monitors and supervises insurers on an on-going basis, 

based on regular communication with the insurer, information obtained 

through supervisory reporting and analysis of market and other relevant 

information. 

9.7 States: See also prior responses. The NAIC Financial Condition Examiners 

Handbook and the NAIC Financial Analysis Handbook both contain explicit 

procedures as part of the Risk-Focused Solvency Surveillance process. 

Specific to insurance groups, the lead state is encouraged to coordinate 

examinations of all types of insurers if they share processes, controls and 

decision-making that may be more efficiently reviewed through a coordinated 

group examination. The lead state performs at least an annual financial 

analysis of the insurance group.

FRB: Supervisory plans for the largest BHCs, SLHCs, state member banks,

and nonbank financial companies are generally prepared at least annually and 

sometimes more frequently. The plans are vetted at the respective Reserve 

Bank and System management committees so that emerging or growing risks 

are properly addressed.

9.8 The supervisor sets the objective and scope for on-site inspections, 

develops corresponding work programs and conducts such inspections. 

9.8 States: The NAIC Financial Condition Examiners Handbook contains an 

explicit procedure for the entire examination cycle, from pre-planning to the 

findings letter to the company, and including follow up. Detailed procedures 

for control and detail testing, guidance for sampling, etc., are all resources 

provided to the regulators for use in their examination work.

FRB: Supervisory plans for the largest BHCs, SLHCs, state member banks,

and nonbank financial companies are generally prepared at least annually and 

sometimes more frequently. The plans are vetted at the respective Reserve 

Bank and System management committees so that emerging or growing risks 

are properly addressed.

9.9 The supervisor discusses with the insurer any relevant findings of the 

supervisory review and the need for any preventive or corrective action. 
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The supervisor follows up to check that required actions have been taken 

by the insurer. 

9.9 States: As indicated in ICP/Std. 9.8, the NAIC Financial Condition 

Examiners Handbook contains an explicit procedure to follow up on any 

actions taken by the insurer in response to current and/or prior examination 

findings.

FRB: The results of an on-site examination or inspection are reported to the 

board of directors and management of the organization in a report of 

examination or inspection, which generally includes a confidential supervisory 

rating of the financial condition of the organization. The supervisory rating 

system is a supervisory tool that all of the federal and state banking agencies 

use to communicate to organizations the agency’s assessment of the 

organization and to identify institutions that raise concern or require special 

attention.

ICP 10 Preventive and Corrective Measures

10 The supervisor takes preventive and corrective measures that are timely, 

suitable and necessary to achieve the objectives of insurance supervision.

10 States: The supervisor has broad powers to take preventive and corrective 

measures that are timely, suitable, and necessary to achieve the objective of 

protection of policyholders. Preventive and corrective measures can emanate 

from a variety of places including, but not limited to, a corrective action plan 

related to the triggering of an RBC event, a corrective action plan related to an 

on-site examination of an insurer, or corrective actions taken based on 

hazardous financial condition. NAIC Accreditation Program review ensures 

the states have certain minimum standards and resources in place.

FRB: As discussed in its response to ICP 1 (above), the FRB has supervisory 

authority over BHCs, SLHCs, state member banks, certain FBOs, and 

nonbank financial companies. The FRB is the consolidated supervisor of 

BHCs, SLHCs, FBOs, and nonbank financial companies and regulates their 

operations, activities, and capital (to varying degrees), among other things. 

The FRB is the primary federal banking regulator of state member banks. The 

FRB has the power to take action against the entities it supervises, including 

taking timely and suitable preventive and corrective measures.

In carrying out its supervisory activities, the FRB routinely communicates and 

coordinates supervision with state insurance regulatory authorities, including 
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those responsible for licensing and regulating the insurance subsidiaries of the 

BHCs, SLHCs, state member banks, FBOs, and nonbank financial companies.

10.1 The supervisor has the power to take action against individuals or entities 

that conduct insurance activities without the necessary licence.

10.1 States: The supervisor has broad powers to take enforcement action against 

individuals or entities that operate without a license. In cases where there is 

the potential for immediate harm to policyholders, the supervisor can take 

immediate steps to effectuate a cease and desist action.

FRB: State laws provide for the licensing of insurance companies and 

insurance activities. 

The FRB, as supervisor of BHCs, SLHCs, nonbank financial companies, and 

state member banks, among others, has the power to take action against the 

entities it supervises that may engage in activities, including insurance 

activities, for which the entity has not received prior regulatory approval. See, 

e.g., 12 U.S.C. § 1844(b) and 1467a(g). 

10.2 The supervisor has sufficient authority and ability, including the 

availability of adequate instruments, to take timely preventive and 

corrective measures if the insurer fails to operate in a manner that is 

consistent with sound business practices or regulatory requirements. 

There is a range of actions or remedial measures which include allowing 

for early intervention when necessary. Preventive and corrective 

measures are applied commensurate with the severity of the insurer’s 

problems.

10.2 States: As mentioned earlier, the supervisor has broad authority and the 

ability, including the availability of adequate instruments (including the 

issuance of a notice of cease and desist), if the insurer fails to operate in a 

manner that is consistent with sound business practices or regulatory 

requirements. The range of actions or remedial measures can be tailored to 

the specific concerns noted including, but not limited to divestiture of 

particular investments, mandating additional capital infusions, and modifying 

certain market conduct practices. According to the Model Holding Company 

Act, every officer or director of an insurance holding company system who 

knowingly violates, participates in, or assents to, or permits transactions or 

investments that have not been properly reported or submitted shall be subject 

to civil fines. Any officer, director, or employee of an insurance holding 
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company system who willfully and knowingly subscribes to or makes or 

causes false statements or reports to be made with the intent to deceive the 

commissioner shall be subject to imprisonment, civil fines, or 

both. Whenever it appears to the commissioner that any person has 

committed a violation of Section 3 of the Model Holding Company Act and 

which prevents the full understanding of enterprise risk to the insurer, the 

violation may serve as an independent basis for disapproving dividends and 

placing the insurer under an order of supervision.

Whenever it appears any person has committed a violation of the insurance

holding company law that so impairs the financial condition of the insurer as 

to threaten insolvency or make further transaction of business hazardous to 

policyholders, creditors, shareholders or the public, then the commissioner 

may act under the receivership law to take possession of the insurer and 

conduct its business. Subject to conditions, if an order of liquidation or 

rehabilitation has been entered, the receiver shall have a right to recover from 

any parent or affiliate who controlled the insurer the amount of distributions 

paid or any payments where the distribution or payment was made during the 

year preceding the order. Any person who was a parent or other controlling 

person or affiliate at the time the distributions were paid shall be liable up to 

the amount of the distributions or payments.

Whenever it appears that any person has committed a violation of the holding 

company law that makes continued operation of an insurer contrary to the 

interests of policyholders or public, the commissioner may, after notice and 

opportunity to be heard, suspend or revoke the insurer’s license to do 

business.

FRB: As discussed in the response to ICP 1 (above), under U.S. law, 

supervision of the insurance activities of BHCs, SLHCs, FBOs, state member 

banks, and nonbank financial companies occurs at the state level in the 

jurisdictions in which the insurance activities are conducted. Remedial action 

regarding insurance activities for which the entity has received prior 

regulatory approval, therefore, is solely within the authority of the state 

insurance regulators. The FRB, as the consolidated supervisor of BHCs, 

SLHCs, and FBOs, may take a number of actions or remedial measures 

regarding the capital and operations of the consolidated organization but may 

not take direct action regarding approved insurance activities of those 

institutions. The FRB may take (or require a supervised entity to take)

remedial measures, except for insurance activities, when, in the FRB’s

judgment, a BHC or SLHC, for example, is not complying with laws or

regulations or is likely to be engaged or is engaged in an unsafe or unsound 

practice. In general, these authorities provide the FRB with both a range of

proactive and remedial measures to address matters of concern and the 
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discretion to determine when to employ them. The measures include

restricting the current activities and operations of the organization, requiring

new remedial activities, withholding or conditioning approval of new activities

or acquisitions, restricting or suspending payments to shareholders or share

repurchases, restricting asset transfers, barring individuals from banking,

replacing or restricting the powers of managers, board directors or controlling

owners, facilitating a takeover by or merger with a healthier institution, 

providing for the interim management of the bank, revoking or recommending

the revocation of the banking license, and issuing monetary fines against

institutions and individuals. In general, remedial measures are imposed

according to the extent and severity of the problem being addressed. The same 

supervisory principles and authorities apply to state member banks that 

engage in approved insurance activities. Similarly, the FRB may take a 

number of actions against a nonbank financial company, including issuing 

cease and desist orders and removing certain individuals from office in the 

company. See 12 U.S.C. § 5362.

10.3 There is a progressive escalation in actions or remedial measures that can 

be taken if the problems become worse or the insurer ignores requests 

from the supervisor to take preventive and corrective action.

10.3 States: There is a progressive escalation in actions or remedial measures that 

can be taken if the problems become worse or the insurer ignores requests 

from the supervisor. For example, in the area of risk-based capital, there are 

four levels of supervisory intervention with each level becoming progressively 

more challenging and demanding on the insurer. 

FRB: See the FRB response to ICP/Std. 10.2. The FRB has no direct 

authority over insurance activities of the entities that it supervises. The 

primary supervisors of the insurance activities are the individual states in 

which the insurance companies operate, each of which has its own authorities 

to take remedial measures.

10.4 If necessary, the supervisor requires the insurer to develop an acceptable 

plan for prevention and correction of problems. Preventive and 

corrective plans include agreed and acceptable steps to be taken to 

resolve the issues raised within an acceptable timeframe. Once preventive 

and corrective plans have been agreed to or imposed, the supervisor 

periodically checks to determine that the insurer is complying with the 

measures.
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10.4 States: The supervisor has broad discretion in determining an acceptable plan 

and in establishing acceptable time frames. In the case of capital deficiencies 

associated with risk-based capital requirements, the statute provides fixed time 

frames for submitting an acceptable company action plan and the supervisory 

review of the company action plan. The supervisor can use a variety of 

approaches to check on compliance including on-site inspections to verify that 

company actions have taken place. 

FRB: With respect to BHCs, SLHCs, state member banks, and nonbank 

financial companies, including those that control insurance companies, the 

FRB may require such companies to develop appropriate plans for the 

prevention and correction of problems. 

If a U.S. federal banking agency determines that a supervised entity has 

problems that may affect safety and soundness or is not in compliance with 

laws and regulations, it may take supervisory action to ensure that the 

supervised entity undertakes corrective measures. Typically, weaknesses and 

deficiencies are communicated to the management and directors of a 

depository institution, BHC, SLHC, or nonbank financial company through 

the examination process and in a written report. Management and directors 

are then asked to address all identified problems and to take measures to 

ensure that the problems are corrected and will not recur. 

While most problems are resolved promptly after they are brought to the 

attention of a depository institution’s or its holding company’s management 

and directors, in some situations, the appropriate agency may need to take 

supervisory action, requesting that the supervised entity adopt an informal or 

formal enforcement action to address the problem, including the adoption of 

board resolutions or entering into a memorandum of understanding. In 

practice, the type of enforcement action pursued should be commensurate with 

the severity of weaknesses and deficiencies identified at the entity, with 

informal enforcement actions being the least severe and revocation of banking 

charter, revocation of membership in the Federal Reserve System, or 

termination of deposit insurance being more severe. 

10.5 The supervisor communicates with the Board and Senior Management 

and Key Persons in Control Functions and brings to their attention any 

material concern in a timely manner to ensure that preventive and 

corrective measures are taken and the outstanding issues are followed 

through to a satisfactory resolution.

10.5 States: Largely dependent on the nature of the regulatory concerns, the 

supervisor may communicate with the board and senior management and key 
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persons in control functions. The supervisor is regularly engaged in 

communication with senior officers and may include communications with the 

board to the extent deemed necessary and appropriate. In cases where an onsite inspection has resulted in regulatory findings of a serious nature, these 

must be communicated to the board and require senior management to 

respond to key findings and recommendations included within the Report of 

Examination.

FRB: With respect to BHCs, SLHCs, state member banks, and nonbank 

financial companies, FRB supervisory staff members routinely communicate 

supervisory concerns to the appropriate parties at the supervised firms and 

monitor the extent to which the firm remediates the identified weaknesses.

10.6 The supervisor initiates measures designed to prevent a breach of the 

legislation from occurring, and promptly and effectively deals with 

noncompliance that could put policyholders at risk or impinge on any 

other supervisory objectives.

10.6 States: Supervisors use discretion in establishing measures that are designed 

to prevent a breach of the legislation from occurring, including regular or 

interim reporting (by insurers) of certain legislative requirements and/or 

regular compliance reviews conducted by the supervisor. Supervisors 

promptly and effectively address noncompliance issues including actions 

which may result in fines and penalties levied on the insurer.

FRB: The FRB has no direct authority over the insurance activities of the 

entities that it supervises. The protection of policyholders is under the 

jurisdiction of the states in which the insurance activities occur. As described 

in the FRB’s response to ICP/Std. 10.2, the FRB, as the consolidated 

supervisor of BHCs, SLHCs, FBOs, and nonbank financial companies, may 

take a number of actions or remedial measures regarding the capital and 

operations of the consolidated organization but may not take direct action 

regarding approved insurance activities of those institutions. Such actions or 

remedial measures may, however, help strengthen the consolidated entity

indirectly the entity’s insurance activities.

ICP 11 Enforcement

11 The supervisor enforces corrective action and, where needed, imposes 

sanctions based on clear and objective criteria that are publicly disclosed.
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11 States: Relevant state statutes provide for sanctions in certain cases where 

violations or noncompliance have occurred. These sanctions are clearly 

delineated in the relevant insurance codes and are publicly disclosed.

FRB: As stated in the FRB’s response to ICP 1, the FRB does not directly 

regulate the insurance activities of its supervised entities. The primary 

supervisors of insurance activities are the individual states in which the 

insurance companies operate. The FRB relies on the appropriate state 

supervisor to monitor and enforce corrective measures taken regarding 

insurance activities. In carrying out its supervisory activities, the FRB 

routinely communicates and coordinates supervision with state insurance 

regulatory authorities, including those responsible for licensing and regulating 

the insurance subsidiaries of the BHCs, SLHCs, state member banks, FBOs, 

and nonbank financial companies. Section 162 of the Dodd-Frank Act (12 

U.S.C. § 5362) extends to the FRB direct enforcement authority over a 

nonbank financial company, except for those activities of the nonbank 

financial company that are regulated by another financial regulatory agency. 

The FRB’s enforcement authority over regulated entities and individuals 

includes both measures to correct behavior and to sanction misconduct in 

specified circumstances. Remedial and corrective measures available to the 

FRB are described in the response to ICP/Std. 10.2. The FRB may issue cease 

and desist orders requiring prospective action to correct violations of any law 

or regulation or unsafe and unsound practice, and to ensure future compliance 

by the parties involved. 12 U.S.C. § 1818(b). The FRB may also order 

regulated entities and their responsible individuals to pay civil money 

penalties as sanctions for specified misconduct. The amount of the penalty the 

FRB may order is based on the severity of the misconduct as measured by 

aggravating and mitigating factors set forth by statute. 12 U.S.C. § 1818(i)(2). 

In addition, the FRB may remove and prohibit an individual from further 

employment or participation in the control or operation of various types of 

entities if the FRB finds that the individual’s misconduct satisfies specific 

statutory standards. 12 U.S.C. § 1818(e). In the event a perceived problem 

involves a nonbank financial company for which another governmental 

agency is the primary regulator, the FRB may first refer the matter to that 

agency and, if no action is taken within 60 days, may thereafter initiate its 

own action. 12 U.S.C. § 5362(b). 

11.1 The supervisor has the power to enforce corrective action in a timely 

manner where problems involving insurers are identified. The supervisor 

issues formal directions to insurers to take particular actions or to desist 

from taking particular actions. The directions are appropriate to address 
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the problems identified.

11.1 States: The supervisor has the power to enforce corrective action in a timely 

manner where problems involving insurers are identified. The supervisor 

issues formal directions to insurers to take particular actions; the corrective 

measures are commensurate to the nature and scale of issues identified.

FRB: Certain BHCs, SLHCs, state member banks, FBOs, and nonbank 

financial companies directly engage in insurance activities or are affiliated 

with insurance companies through subsidiary arrangements. The FRB does 

not directly regulate the insurance activities of its supervised entities. The 

primary supervisors of the insurance activities are the individual states in 

which the insurance companies operate. In carrying out its supervisory 

activities, the FRB routinely communicates and coordinates supervision with 

state insurance regulatory authorities, including those responsible for licensing 

and regulating the insurance subsidiaries of the BHCs, SLHCs, state member 

banks, FBOs, and nonbank financial companies. 

11.2 The supervisor has a range of actions available in order to apply 

appropriate enforcement where problems are encountered. Powers set 

out in legislation should at a minimum include restrictions on business 

activities and measures to reinforce the financial position of an insurer.

11.2 States: The supervisor has broad discretion and powers to apply appropriate 

enforcement where problems are encountered. These powers include 

restrictions on business activities, requirements to increase loss reserves, 

requirements to increase capital, RBC corrective actions, measures to retain 

expert help in addressing complex areas and in certain circumstances fining 

individual directors and senior managers of insurers and suspending licensure.

FRB: As discussed in the FRB’s response to ICP/Std. 10.2, the FRB, as the 

consolidated supervisor of BHCs, SLHCs, and FBOs, may take a number of 

actions or remedial measures regarding the capital and operations of the 

consolidated organization, but may not take direct action regarding approved 

insurance activities of those institutions. Please see ICP/Std. 10.2 for a 

comprehensive list of proactive and remedial measures available to address 

matters of concern. 

11.3 After corrective action has been taken or remedial measures, directions 

or sanctions have been imposed, the supervisor checks compliance by the 
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insurer and assesses their effectiveness.

11.3 States: The supervisor checks compliance by the insurer in a variety of ways, 

including the submission of reports to the supervisor, face-to-face meetings 

with the supervisor, and on-site inspections focused on compliance and 

verification of actions taken by the insurer.

FRB: The FRB uses various means to monitor compliance with its remedial 

measures and orders and to ensure their effectiveness, including examinations 

and inspections, where applicable. The FRB may require a regulated entity to 

submit detailed reports regarding progress in remediating deficiencies 

identified by FRB examiners.

11.4 The supervisor has effective means to address management and 

governance problems, including the power to require the insurer to 

replace or restrict the power of Board Members, Senior Management, 

Key Persons in Control Functions, significant owners and external 

auditors.

11.4 States: The supervisor has effective means to address management and 

governance problems. Under the Hazardous Financial Condition Model

Regulation (#385), the supervisor has the authority to correct corporate 

governance practice deficiencies, and adopt and utilize governance practices 

acceptable to the supervisor. Under the same model regulation, the supervisor 

can consider whether the management of an insurer, including officers, 

directors, or any other person who directly or indirectly controls the operation 

of the insurer, fails to possess and demonstrate the competence, fitness and 

reputation deemed necessary to service the insurer in such position. 

The states’ receivership laws include authority for the conservator or 

rehabilitator to possess all the powers of directors, officers and managers of an 

insurer, whose authority may be suspended, and such authority may include 

the power to discharge employees.

FRB: As discussed in the FRB’s response to ICP 11, the FRB has broad 

authority to remove and prohibit directors, officers, employees, agents, and 

controlling shareholders with regard to entities it supervises. However, with 

regard to insurance activities, this authority rests with the state regulatory 

agencies of the states in which the insurance activities occur. In the event a 

perceived problem involves a nonbank financial company, the FRB may first 

refer the matter to that agency and, if no action is taken within 60 days, may 
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thereafter initiate its own action. 12 U.S.C. § 5362(b).

11.5 Where necessary and in extreme cases, the supervisor imposes 

conservatorship over an insurer that is failing to meet prudential or other 

requirements. The supervisor has the power to take control of the 

insurer, or to appoint other specified officials or receivers for the task, 

and to make other arrangements for the benefit of the policyholders.

11.5 States: Subject to a court of competent jurisdiction, the supervisor may be 

appointed as conservator of an insurance company if the insurer is failing to 

meet prudential or other requirements. The supervisor has broad discretion in 

retaining experts and other individuals in the court oversight of insurance 

companies in conservatorship/receivership.

FRB: The authority to impose conservatorship or similar actions on insurance 

companies is vested in the state regulatory authorities of those states in which 

the insurance activities occur. 

11.6 There are sanctions by way of fines and other penalties against insurers 

and individuals where the provisions of the legislation are breached. The 

sanctions are proportionate to the identified breach.

11.6 States: Generally speaking, there are sanctions by way of fines and other 

penalties against insurers, and in some cases, against individuals depending on 

the legislation. The specified fines or other penalties are generally prescribed 

in law. 

FRB: See the FRB’s response to ICP 11. The FRB has no direct authority 

over insurance activities of the entities it supervises. The state regulatory 

authorities of the states in which the insurance companies operate have the 

authority to impose sanctions on insurers. 

11.7 The legislation provides for sanctions against insurers and individuals 

who fail to provide information to the supervisor in a timely fashion, 

withhold information from the supervisor, provide information that is 

intended to mislead the supervisor or deliberately misreport to the 

supervisor.

11.7 States: Legislation does provide for sanctions against insurers and 

individuals who fail to provide information to the supervisor in a timely 
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fashion, withhold information from the supervisor, or provide information that 

is intended to mislead the supervisor or deliberately misreport to the 

supervisor. To illustrate, the Model Holding Company Act states, in part, that 

“Any officer, director or employee of an insurance holding company system 

who willfully and knowingly subscribes to or makes or causes to be made any 

false statements or false reports or false filings with the intent to deceive the 

commissioner in the performance of his or her duties under this Act, upon 

conviction shall be imprisoned for not more than [insert amount] years, or 

fined $[insert amount] or both. Any fines imposed shall be paid by the 

officer, director or employee in his or her individual capacity.”

FRB: See the FRB’s response to ICP 11. The FRB has no direct authority 

over insurance activities of the entities it supervises. The state regulatory 

authorities of the states in which the insurance companies operate have the 

authority to impose sanctions on insurers. 

11.8 The process of applying sanctions does not delay necessary preventive 

and corrective measures and enforcement.

11.8 States: The process of applying sanctions does not delay necessary 

preventive and corrective measures and enforcement. Depending on the 

nature of the preventive and corrective measures, the supervisor can act 

immediately to remedy the situation.

FRB: See the FRB’s response to ICP 11. The FRB has no direct authority 

over insurance activities of the entities it supervises. The state regulatory 

authorities of the states in which the insurance companies operate have the 

authority to impose sanctions on insurers. 

11.9 The supervisor, or another responsible body in the jurisdiction, takes 

action to enforce all the sanctions that have been imposed.

11.9 States: The supervisor is generally responsible for taking action to enforce all 

of the sanctions which have been imposed.

FRB: See the FRB’s response to ICP 11. The FRB has no direct authority 

over insurance activities of the entities it supervises. The state regulatory 

authorities of the states in which the insurance companies operate have the 

authority to impose sanctions on insurers. 
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11.10 The supervisor ensures consistency in the way insurers and individuals 

are sanctioned, so that similar violations and weaknesses attract similar 

sanctions.

11.10 States: The supervisor ensures consistency in the way insurers and 

individuals are sanctioned. A number of factors have to be considered in 

ensuring consistency, such as past compliance issues, change in personnel, 

etc.

FRB: The FRB enforces the laws and regulations under its jurisdiction so

that they are enforced in a uniform and consistent manner against individuals 

and entities. Designated senior staff members of the FRB review referrals or 

recommendations for enforcement actions from the Reserve Banks or from 

other sources to ensure such consistency and to bring previous agency 

precedent to the attention of the FRB before it initiates enforcement actions 

and before a final agency decision is rendered after the adjudication of a case. 

However, as discussed in the FRB’s response to ICP 11, since the FRB has no 

direct authority over insurance activities of the entities it supervises, it is 

within the jurisdiction of the state regulatory authorities to impose sanctions 

against insurers and ensure consistency in the way insurers and individuals are 

sanctioned. 

ICP 12 Winding-up and Exit from the Market

12 The legislation defines a range of options for the exit of insurance legal 

entities from the market. It defines insolvency and establishes the criteria 

and procedure for dealing with insolvency of insurance legal entities. In 

the event of winding-up proceedings of insurance legal entities, the legal 

framework gives priority to the protection of policyholders and aims at 

minimising disruption to provision of benefits to policyholders.

12 States: State legislation provides for insurance companies to exit the market. 

There is comprehensive state legislation governing insolvencies including 

criteria and procedures as well as the prioritization of claim payments during 

insolvency proceedings. The legal framework gives priority to the protection 

of policyholders and subordinates the claims of general creditors to those of 

policyholders. 

Guaranty Funds work in tandem with the insolvency laws and are established 

throughout the United States (on a state-by-state basis) to provide an essential 

safety net for policyholders and other claimants and beneficiaries of the 
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insurance coverage. Guaranty fund protection is triggered by the legal finding 

of insolvency and serves to indemnify policyholders, up to stated limits, that 

have suffered a claim.

FIO and FRB: Pursuant to Title I and Title II of the Dodd-Frank Act, FIO, 

the FRB, and the FDIC have responsibilities relating to the resolution of 

insurers under certain circumstances, as described below.

Under Title I of the Dodd-Frank Act, the Director of FIO and the Chair of the 

FRB (among others) serves on and supports the work of the FSOC, 12 U.S.C. 

§ 5321, and Title V of the Dodd-Frank Act authorizes FIO to recommend that 

the FSOC designate an insurer. 31 U.S.C. § 313(c)(1)(C). Insurers 

designated by the FSOC are subject to enhanced prudential standards and 

consolidated supervision by the FRB. The FRB, together with the FDIC, has 

issued regulations requiring certain BHCs and nonbank financial companies

(including those insurers that have been designated by the FSOC), to develop 

a “plan for rapid and orderly resolution in the event of material financial 

distress or failure” (i.e., a “living will”) for how the companies would be 

resolved in a rapid and orderly manner under the U.S. Bankruptcy Code (or 

other applicable insolvency regime) in the event of material financial distress 

or failure. 12 CFR Parts 243 and 381. The FRB and FDIC’s joint resolution 

plan regulations contain mechanisms through which the agencies can address 

weaknesses and inadequacies within any resolution plan, including requiring 

changes to the plan that would remediate such weaknesses. See, e.g., 12 CFR 

243.5 and 381.5; 12 U.S.C. § 5365(d)(5)(B).

Under Title II of the Dodd-Frank Act, a proceeding under the U.S. Bankruptcy 

Code or otherwise applicable insolvency law is the preferred method for 

resolving a U.S. financial company. For insurers, that means conservatorship, 

rehabilitation, or liquidation under state insurance insolvency laws. Title II 

allows for a separate process when systemic risk is potentially at issue. For an 

insurer or a holding company for which the largest subsidiary is an insurer, 

following a recommendation by the Director of FIO and the FRB (in 

consultation with the FDIC), the Secretary of the Treasury (in consultation 

with the President) may make a systemic risk determination, pursuant to 

statutorily prescribed criteria, to place such company into receivership. Title 

II provides that the liquidation of an insurer shall be conducted under 

applicable state law. If the appropriate state regulator does not act within 

sixty days to begin orderly liquidation proceedings for the insurer, the FDIC 

has the authority to “stand in the place of the appropriate regulatory agency 

and file the appropriate judicial action in the appropriate State court to place 

such company into orderly liquidation under the laws and requirements of the 

State.” 12 U.S.C. § 5383(e)(3).
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12.1 The procedures for the winding-up and exit of an insurer from the 

market are clearly set out in legislation. A high legal priority is given to 

the protection of the rights and entitlements of policyholders. The 

procedures aim at minimising the disruption to the timely provision of 

benefits to policyholders.

12.1 States: General procedures are set out in state legislation. The review 

conducted by the supervisor sets the highest priority on the protection of the 

rights and entitlements of policyholders without creating any disruption on the 

timely provision of benefits to policyholders. 

Guaranty Funds work in tandem with the insolvency laws and are established 

throughout the United States (on a state-by-state basis) to provide an essential 

safety net for policyholders, and other claimants and beneficiaries of the 

insurance coverage. Guaranty fund protection is triggered by the legal finding 

of insolvency and serves to indemnify policyholders, up to stated limits, that 

have suffered a claim.

FIO and FRB: Under Title II, a proceeding under the U.S. Bankruptcy Code 

or otherwise applicable insolvency law is the preferred method for resolving a 

U.S. financial company. For insurers, that means conservatorship, 

rehabilitation, or liquidation under state insurance insolvency laws. Title II 

allows for a separate process when systemic risk is potentially at issue. For an 

insurer or a holding company for which the largest subsidiary is an insurer, 

following a recommendation by the Director of FIO and the FRB (in 

consultation with the FDIC), the Secretary of the Treasury (in consultation 

with the President) may make a systemic risk determination, pursuant to 

statutorily prescribed criteria, to place such company into receivership. Title 

II provides that the liquidation of an insurer shall be conducted under 

applicable state law. If the appropriate state regulator does not act within 60

days to begin orderly liquidation proceedings for the insurer, the FDIC has the 

authority to “stand in the place of the appropriate regulatory agency and file 

the appropriate judicial action in the appropriate State court to place such 

company into orderly liquidation under the laws and requirements of the 

State.” 12 U.S.C. § 5383(e)(3).

12.2 The legislation provides for the determination of the point at which it is 

no longer permissible for an insurer to continue its business.

12.2 States: The legislation defines the point at which it is no longer permissible 

for an insurer to continue its business. The NAIC Risk-Based Capital (RBC) 
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For Insurers Model Act (RBC Model Act) defines a level of regulatory capital 

where it is no longer permissible for an insurer to continue its business 

(“Mandatory Control Level”).

FIO and FRB: In making a recommendation to the Secretary of the Treasury 

under Title II of the Dodd-Frank Act regarding an insurer or a holding 

company for which the largest U.S. subsidiary is an insurer, the FIO and FRB 

(in consultation with the FDIC) must evaluate various statutorily prescribed 

criteria, including whether the company under consideration is in default or 

danger of default. The Secretary of the Treasury (in consultation with the 

President) must also make a determination based on statutorily prescribed 

criteria, including that the financial company is in default or in danger of 

default. The Dodd-Frank Act provides that a financial company shall be 

considered to be in default or in danger of default if (1) a case has been, or 

likely will promptly be, commenced under the Bankruptcy Code; (2) the 

company has incurred, or is likely to incur, losses that will deplete all or 

substantially all of its capital, and there is no reasonable prospect for the 

company to avoid such depletion; (3) the assets of the company are, or are 

likely to be, less than its obligations to creditors and others; or (4) the 

company is, or is likely to be, unable to pay its obligations (other than those 

subject to a bona fide dispute) in the normal course of business.

ICP 13 Reinsurance and Other Forms of Risk Transfer

13 The supervisor sets standards for the use of reinsurance and other forms 

of risk transfer, ensuring that insurers adequately control and 

transparently report their risk transfer programmes. The supervisor 

takes into account the nature of reinsurance business when supervising 

reinsurers based in its jurisdiction.

13 FIO: FIO, jointly with the United States Trade Representative, may negotiate 

a covered agreement with a foreign insurance authority that, as a practical 

matter, would be designed to establish national standards relating to 

reinsurance, including by pre-empting contrary state laws relating to aspects 

of the supervision of the reinsurance industry that conflict with the covered 

agreement. See 31 U.S.C. § 314.

FRB: When looking at the consolidated risk profile of the entities it 

supervises, the FRB takes into account the use of reinsurance or other forms 

of risk transfer, but it does not directly regulate or supervise the use of 

reinsurance. The FRB’s supervision of nonbank financial companies may 

include a review of the use of any third-party and affiliated reinsurance
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(including captives), but the specific standards concerning the use of 

reinsurance and the form it takes are set at the state level. The FRB has and 

will continue to consult with state insurance regulators on matters such as 

reinsurance used by entities supervised by the FRB. 

Because the FRB does not play a direct role in the supervision of reinsurance, 

the FRB is not providing any further detail to the responses in this ICP.

States: Reinsurers domiciled and licensed in the United States are regulated 

through financial regulation similar to, if not the same as, financial regulation 

for primary insurers. For market regulation, reinsurers are comparatively less 

impacted than primary insurers, largely because of differences in consumer 

knowledge. Reinsurers and insurers have relative equality in negotiating 

leverage and extensive knowledge of the reinsurance product. Thus, market 

regulation is not as extensive as it is in the primary market where consumers 

have less leverage and knowledge of the product. 

With respect to the use of reinsurance, the Credit for Reinsurance laws, 

statutory accounting requirements and procedures applicable to reinsurance 

transactions serve to provide regulators with an effective method of 

monitoring the reinsurance activities of U.S. companies. U.S. primary 

insurance companies may be given statutory credit on their balance sheet for 

insurance risk they transfer via reinsurance. While there is nothing to prevent 

a U.S. insurance company from transacting reinsurance business with any 

other company anywhere in the world, a U.S. ceding company is not permitted 

to take statutory credit for the reinsurance ceded unless the reinsurer meets 

certain requirements. 

The following NAIC model laws, regulations or other guidelines relate to the 

regulation of credit for reinsurance transactions with respect to U.S-domiciled 

and non-U.S. domiciled reinsurers:

 NAIC Credit for Reinsurance Model Law (#785)

 NAIC Credit for Reinsurance Model Regulation (#786)

 NAIC Life and Health Reinsurance Agreements Model Regulation 

(#791)

 NAIC Insurance Holding Company System Regulatory Act and 

Regulation (#440 and #450) 

 Statement of Statutory Accounting Principle (SSAP) No. 61 Life, 
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Deposit-Type and Accident and Health Reinsurance 

 SSAP No. 62R Property and Casualty Reinsurance 

 Appendix A-785 Credit for Reinsurance 

 Appendix A-791 Life and Health Reinsurance Agreements

Models #785 and #786 provide the legal framework under which U.S. 

domiciled insurers are allowed credit for reinsurance ceded. Model #791 

provides additional requirements with respect to life and health reinsurance 

agreements. These models are part of the NAIC accreditation standards, and 

all accredited states have adopted laws which are substantially similar to these 

models. SSAP No. 61––Life, Deposit-Type and Accident and Health 

Reinsurance (SSAP No. 61), SSAP No. 62R––Property and Casualty 

Reinsurance (SSAP No. 62R), and Appendices A-785–Credit for Reinsurance 

and A-791–Life and Health Reinsurance Agreements are included as part of 

the codified statutory accounting guidance within the NAIC Accounting 

Practices and Procedures Manual. These SSAP’s provide statutory accounting 

guidance with respect to reinsurance transactions. The Accounting Practices 

and Procedures Manual is required to be adopted by all accredited states under 

the NAIC accreditation program.

The NAIC Life and Health Reinsurance Agreements Model Regulation 

(#791), as well as SSAP No. 61 and Appendix A-791, provide risk transfer 

requirements with respect to life and health reinsurance agreements. SSAP 

No. 61 provides that reinsurance agreements must transfer risk from the 

ceding entity to the reinsurer in order to receive reinsurance accounting 

treatment. If the terms of the agreement violate the risk transfer criteria 

contained within SSAP No. 61, it is required that the reporting entity follow 

the guidance for Deposit Accounting with respect to the agreement. Any 

contractual feature that delays timely reimbursement violates the conditions of 

reinsurance accounting. For non-proportional life and health reinsurance 

agreements such as stop loss and catastrophe reinsurance, contract terms must 

be evaluated to assess whether they transfer significant risk to the reinsurer. 

Transfer of insurance risk requires that the reinsurer’s payment to the ceding 

entity depend on and directly vary with the amount and timing of claims 

settled under the reinsured contracts. Contractual features that can delay 

timely reimbursement prevent this condition from being met. Appendix A791 includes relevant excerpts from Model #791, and incorporates this 

guidance in to SSAP No. 61 by reference. 

SSAP No. 62R provides risk transfer requirements with respect to property 

and casualty reinsurance agreements. SSAP No. 62R provides that the
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essential element of every true reinsurance agreement is the undertaking by 

the reinsurer to indemnify the ceding entity, i.e., reinsured entity, not only in 

form but in fact, against loss or liability by reason of the original insurance. 

Unless the agreement contains this essential element of risk transfer, no credit 

is allowed to be recorded. Insurance risk involves uncertainties about both (a) 

the ultimate amount of net cash flows from premiums, commissions, claims, 

and claims settlement expenses (underwriting risk) and (b) the timing of the 

receipt and payment of those cash flows (timing risk). Actual or imputed 

investment returns are not an element of insurance risk. Insurance risk is 

fortuitous—the possibility of adverse events occurring is outside the control of 

the insured. Indemnification of the ceding entity against loss or liability 

relating to insurance risk in reinsurance requires both of the following:

 The reinsurer assumes significant insurance risk under the reinsured 

portions of the underlying insurance agreements; and

 It is reasonably possible that the reinsurer may realize a significant loss 

from the transaction.

The Model Holding Company Act (#440) and its related Regulation (#450) 

allow states to regulate transactions between insurers and other affiliated 

entities. The models include provisions relating to reinsurance between 

affiliated companies with common ownership or control. Both models are 

included in the NAIC accreditation program, and all accredited states have 

adopted laws which are substantially similar to these models. The NAIC 

adopted revisions to Model #785 and Model #786 in 2011, which reduce 

reinsurance collateral requirements for certified reinsurers licensed and 

domiciled in qualified jurisdictions. These revisions also include new 

notification requirements for U.S. ceding insurers for the purpose of 

disclosing concentration risk with respect to reinsurance ceded when certain 

thresholds are met or are anticipated to be met. Under the reinsurance 

concentration risk notification requirements, ceding insurers must notify the 

Commissioner within 30-days if (1) recoverables from any single reinsurer or 

group exceed 50% of the ceding insurer’s surplus; or (2) more than 20% of the 

ceding insurer’s gross written premium is ceded to a single reinsurer or group. 

These requirements apply to reinsurance ceded to foreign and domestic 

reinsurers alike. These revisions are currently an optional standard within the 

NAIC accreditation program. As of June 2014, 21 states have adopted the 

revisions to the credit for reinsurance models. Insurers domiciled in these 21 

states write nearly 60% of the primary insurance premium in the United 

States. The NAIC is aware of seven additional states that have or will 

potentially introduce similar proposals in 2014 or 2015. These additional 
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seven states would raise the market share to approximately 80%.

13.1 The supervisor requires that cedants have reinsurance and risk transfer 

strategies appropriate to the nature, scale and complexity of their 

business, and which are part of their wider underwriting and risk and 

capital management strategies. The supervisor also requires that cedants 

have systems and procedures for ensuring that such strategies are 

implemented and complied with, and that cedants have in place 

appropriate systems and controls over their risk transfer transactions.

13.1 States: The process in the United States for considering the risk that the 

insurer is undertaking begins with the licensing of the insurer. All companies 

that wish to engage in the practice of insurance, as defined by state statute, 

must submit an application for a certificate of authority to conduct business in 

that state. The application must include information on the insurer’s proposed 

management team and proposed board, business plan and projected financial 

information on the insurer. The application must also include, inter alia, a 

summary of the applicant’s reinsurance program, listing all reinsurance 

agreements and providing a basic explanation of each agreement.

The level of detail within the business plan would be expected to be 

commensurate with the complexity and amount of risk proposed to be 

undertaken by the insurer. The plan would be expected to address the risk 

limitation requirements and the minimum capital and surplus requirements for 

both the first year of operations as well as the near term. The regulator will 

consider the overall ability for the plan to succeed based upon the assumptions 

and factors, as well as the ability to mitigate risks and initial capital 

requirements through the use of reinsurance, in determining if a license should 

be granted. The newly adopted company licensing accreditation standards 

require that the state review the applicant’s business and strategic plans, pro 

forma financial projections, proposed reinsurance program, investment policy, 

financing arrangements, and related party agreements.

If the insurer is granted a license, the insurer will begin to be monitored under 

the risk-focused surveillance process; just as any other insurer is monitored. 

The intent of the risk-focused surveillance process is to broaden and enhance 

the identification of risk inherent in an insurer’s operations and utilize that 

evaluation in formulating the ongoing surveillance of the insurer. The riskfocused surveillance process includes identifying significant risks, assessing 

and analyzing those risks, documenting the results of the analysis, and 

developing recommendations for how the analysis can be applied to the 

ongoing monitoring of the insurer. In full, this process provides effective 
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procedures to monitor and assess the solvency of insurers on a continuing 

basis. The risk-focused surveillance cycle includes the following five 

elements: (1) risk-focused examination; (2) financial analysis; (3) review of 

internal/external changes; (4) priority system; and (5) supervisory plan. 

An insurer’s reinsurance program is an important consideration within the 

risk-focused surveillance process. For example, the state’s financial analysis 

department will perform quarterly reviews of the insurer’s financial statements 

(and related available information) to determine how the company is 

performing against its projected plan. The NAIC Financial Analysis 

Handbook sets forth the standards for the analysis that most states conduct on 

their insurers on a quarterly and annual basis. Pursuant to this handbook, state 

insurance regulators analyze many key points and prospective risk 

considerations with respect to a company’s reinsurance agreements and 

overall reinsurance program, including but not limited to consideration of the 

following items:

 Whether the insurer has a reinsurance program in place that adequately 

supports its risk profile;

 Whether the insurer’s accounting for reinsurance ceded is proper and 

in accordance with the NAIC Accounting Practices and Procedures 

Manual and the Annual Statement Instructions;

 Whether amounts recoverable from reinsurers are significant;

 Whether amounts recoverable from reinsurers are collectible;

 Whether reinsurance between affiliates involves any unusual shifting 

of risk from one affiliate to another;

 Whether pyramiding may be occurring that could cause significant 

collectability risk to the insurer;

 Whether reinsurance is being used for fronting purposes and if so, 

whether any potential abuses exist;

 Whether any unusual reinsurance intermediary agreements or 

reinsurance assumed agreements exist;

 Whether any unusual reinsurance transactions were completed during 

the year. 
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Review of a state insurance department’s financial analysis process is a key 

component within the accreditation standards. There are eight broad standards 

pertaining to financial analysis and numerous specific guidelines with which a 

state insurance department must comply. If a state insurance department is 

accredited, one may be assured that the state insurance department is in 

substantial compliance with these standards and guidelines.

In addition, the NAIC Financial Condition Examiners Handbook outlines 

many detailed risks and considerations with respect to reinsurance. This 

handbook specifically includes identified risks, control best practices, tests of 

controls and detail tests as reference material for state insurance examiners in 

examining an insurer’s reinsurance program, reinsurance transactions, and 

reinsurance-related amounts reported within the statutory financial statements. 

The repository includes considerations from the perspective of both a ceding 

insurer and an assuming insurer. Review of a state insurance department’s 

examination process is a key component within the accreditation standards. 

Insurers also provide information to regulators regarding reinsurance and risk 

mitigation within the ORSA filing. 

13.2 The supervisor requires that cedants are transparent in their reinsurance 

arrangements and the associated risks, allowing the supervisor to 

understand the economic impact of reinsurance and other forms of risk 

transfer arrangements in place.

13.2 States: Insurers and reinsurers are required under state law to file 

standardized annual and quarterly financial reports that the regulators use to 

assess an insurer’s risk and financial condition. These reports contain both 

qualitative and quantitative information and are updated as necessary to 

incorporate significant common insurer risks. Reporting requirements are 

specified in two forms: through the NAIC Accounting Practices and 

Procedures Manual, utilizing fully codified statutory accounting principles 

(SAP), and through the NAIC Quarterly and Annual Statement Instructions. 

Requirements run the gamut from typical accounting requirements (e.g., 

balance sheet and income statement) to detailed data reporting on specified 

schedules (e.g., Schedule D – Investment Schedules, Schedule F –

Reinsurance Schedules, Schedule P – Loss Triangles, etc.). 

SSAP No. 61––Life, Deposit-Type and Accident and Health Reinsurance, 

SSAP No. 62R––Property and Casualty Reinsurance, SSAP No. 63––

Underwriting Pools and Associations Including Intercompany Pools, and the 

NAIC Quarterly and Annual Statement Instructions (specific for each 

company type) provide codified statutory guidance with respect to accounting, 
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reporting and disclosure of reinsurance transactions and information within 

the statutory financial statements. These requirements are part of the NAIC 

accreditation program, and the reporting requirements are applicable to all 

insurers. 

Following is a summary of reinsurance-related information that is provided 

within an insurer’s statutory financial statement: 

 Balance Sheet Items – the statutory balance sheet includes disclosure of 

amounts recoverable from reinsurers, funds held by or deposited with 

reinsured companies, amounts receivable under reinsurance contracts, 

ceded reinsurance premiums payable (net of ceding commission), funds 

held by the company under reinsurance treaties, and the provision 

(liability) required to be recorded for reinsurance with respect to 

uncollateralized unauthorized reinsurance and overdue reinsurance.

 Underwriting and Investment Exhibits – provide information with respect 

to amounts of reinsurance assumed and ceded by line of business 

(separated between affiliates and non-affiliates) for premiums written, 

losses paid and incurred, and expenses.

 General Interrogatories – provide disclosure of information with respect to 

the reporting entity’s reinsurance program (catastrophe reinsurance, 

method used to estimate probable maximum loss, etc.). Information is 

also disclosed with respect to finite-type risks and certain reinsurance 

contracts that include loss limiting features. 

 Notes to the Financial Statements – provide additional information with 

respect to unsecured reinsurance recoverables, reinsurance recoverables in 

dispute, uncollectible reinsurance, commutation of ceded reinsurance and 

retroactive reinsurance agreements. 

 Schedule P – this schedule is intended to display a summary containing 

ten years of historical loss data for all lines of property and casualty 

business. There are seven parts in addition to interrogatories within the 

schedule. The schedule includes various information with respect to 

direct, assumed and ceded business. 

 Property and Casualty Reinsurance Schedule F – the nine parts of 

Schedule F provide a more detailed analysis of reinsurance data that is 

shown in total in various parts of the statutory annual statement. 

Information regarding reinsurance assumed and ceded is included within 

this schedule at the counterparty level of detail. This schedule also 
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includes an aging schedule with respect to reinsurance recoverable 

amounts, and a restatement of the balance sheet to remove the impact of 

reinsurance and identify the net credit for reinsurance reflected in the 

reporting entity’s balance sheet.

 Life, Accident and Health Reinsurance Schedule S – the seven parts of 

Schedule S provide a more detailed analysis of reinsurance data for life, 

accident and health reinsurance that is shown in total in various parts of 

the statutory annual statement. Information regarding reinsurance 

assumed and ceded is included within this schedule at the contract-level of 

detail. This schedule also includes a five-year history of reinsurance 

ceded, and a restatement of the balance sheet to identify the net credit for 

reinsurance.

13.3 The supervisor takes into account the nature of supervision of reinsurers 

and other counterparties, including any supervisory recognition 

arrangements in place.

13.3 States: In November 2011, the NAIC adopted revisions to Credit for 

Reinsurance Model Law (#785) and Credit for Reinsurance Model Regulation 

(#786), which serve to reduce reinsurance collateral requirements for non-U.S. 

licensed reinsurers that are licensed and domiciled in qualified jurisdictions. 

Under the previous version of the Credit for Reinsurance Models, in order for 

U.S. ceding insurers to receive reinsurance credit, the reinsurance was 

required to be ceded to U.S.-licensed reinsurers or secured by collateral 

representing 100% of U.S. liabilities for which the credit is recorded, 

regardless of the domiciliary jurisdiction of the reinsurer. The collateral 

requirements for non-U.S.-licensed reinsurers were a frequent subject of 

debate over the past decade, with various groups calling for the elimination of 

the collateral requirement for reinsurers licensed in well-regulated 

jurisdictions. 

The revised models establish a certification process for reinsurers. A certified 

reinsurer is eligible for collateral reduction with respect to contracts entered 

into or renewed subsequent to certification. Each enacting state has the 

authority to certify reinsurers, or a commissioner has the authority to 

recognize the certification issued by another NAIC-accredited state. 

Reinsurers are subject to certain criteria in order to be eligible for certification, 

as well as ongoing requirements in order to maintain certification. Examples 

of evaluation criteria include financial strength, timely claims payment 

history, and the requirement that a reinsurer be domiciled and licensed in a 

“qualified jurisdiction.” 
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Each state may evaluate the reinsurance supervisory system of a non-U.S.

jurisdiction in order to determine if it is a “qualified jurisdiction.” In August 

2013, the NAIC adopted the Process for Developing and Maintaining the 

NAIC List of Qualified Jurisdictions (NAIC Qualified Jurisdiction Process). 

The NAIC Process is intended as an outcomes-based comparison to financial 

solvency regulation under the NAIC Financial Regulation Standards and 

Accreditation Program, relevant international guidance for recognition of 

reinsurance supervision (IAIS Guidance Paper on Mutual Recognition of 

Reinsurance Supervision), and adherence to international supervisory 

standards (e.g., FSAP, ROSC). A state must consider the NAIC list in its 

determination of qualified jurisdictions. The list is not binding, but a state 

must thoroughly document the justifications for approving any jurisdiction not 

on the list. 

In December 2013, pursuant to the Expedited Review Procedure within the 

NAIC Process, the NAIC approved the following supervisory authorities as 

Conditional Qualified Jurisdictions for inclusion on the NAIC List of 

Qualified Jurisdictions: Bermuda Monetary Authority; German Federal 

Financial Supervisory Authority (BaFin); Swiss Financial Market Supervisory 

Authority (FINMA); and the Prudential Regulation Authority of the Bank of 

England (PRA). The NAIC will complete full reviews of these supervisory 

authorities during 2014, in addition to conducting reviews of the Central Bank 

of Ireland; the French ACPR; and the Financial Services Agency of Japan.

13.4 The question of binding documentation requirements for reinsurance 

contracts is a question of jurisdictional contract law. However, the 

supervisor requires that parties to reinsurance contracts promptly 

document the principal economic and coverage terms and conditions 

agreed upon by the parties and finalise the formal reinsurance contract in 

a timely fashion.

13.4 States: With respect to Property Casualty reinsurance agreements, SSAP No. 

62R acknowledges that it is not uncommon for reinsurance arrangements to be 

initiated before the beginning of a policy period but not finalized until after 

the policy period begins. However, the SSAP provides that whether there was 

an agreement in principle at the beginning of the policy period (and therefore 

the agreement is substantively prospective) shall be based on the facts and 

circumstances. Under SSAP No. 62R, reinsurance contracts that are not 

reduced to written form and signed by the parties within nine months after the 

effective date of the contract are presumed to be retroactive (with some 

limited exceptions) and must receive retroactive reinsurance accounting 

treatment. Exceptions to the retroactive reinsurance rules are made for 
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structured settlements, novations, substitutions of reinsurers, reinsurance 

contracts between affiliates where there is no gain in surplus at the inception 

of the agreement, and reinsurance/retrocession agreements that meet the 

criteria of property/casualty run-off agreements as provided with SSAP No. 

62R. As conditions precedent to receiving reinsurance accounting, the

reinsurance contract must (1) contain an insolvency clause; (2) provide for 

prompt payment of reinsured losses; (3) constitute the entire agreement 

between the parties; (4) not provide a guarantee of profit to either party; (5) 

provide for at least quarterly reports of premiums and losses (unless there is 

no activity during the period); and (6) contain some special provisions if it is a 

retroactive reinsurance contract.

With respect to Life and Health reinsurance agreements, the Life and Health 

Reinsurance Agreements Model Regulation provides that (1) no reinsurance 

agreement or amendment to any agreement may be used to reduce any 

liability or to establish any asset in any financial statement filed with the 

insurance department, unless the agreement, amendment or a binding letter of 

intent has been duly executed by both parties no later than the “as of date” of 

the financial statement; and (2) in the case of a letter of intent, a reinsurance 

agreement or an amendment to a reinsurance agreement must be executed 

within a reasonable period of time, not exceeding ninety (90) days from the 

execution date of the letter of intent, in order for credit to be granted for the 

reinsurance ceded.

13.5 The supervisor assesses whether cedants control their liquidity position to 

take account of the structure of risk transfer contracts and likely 

payment patterns arising from these.

13.5 States: An insurer’s cash flow and liquidity is an important consideration 

under the risk-focused surveillance process. The intent of the risk-focused 

surveillance process is to broaden and enhance the identification of risk 

inherent in an insurer’s operations and utilize that evaluation in formulating 

the ongoing surveillance of the insurer. The risk-focused surveillance process 

includes identifying significant risks, assessing and analyzing those risks, 

documenting the results of the analysis, and developing recommendations for 

how the analysis can be applied to the ongoing monitoring of the insurer. In 

full, this process provides effective procedures to monitor and assess the 

solvency of insurers on a continuing basis. The risk-focused surveillance 

cycle includes the following five elements: (1) risk-focused examination; (2) 

financial analysis; (3) review of internal/external changes; (4) priority system; 

and (5) supervisory plan. 
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Analysts will evaluate and determine whether an insurer’s investment plan 

and investment portfolio appears to result in investments and practices that are 

appropriate for the insurer based on the types of business written, and that it is 

adequately diversified with the appropriate level of liquidity to meet cash flow 

requirements. Where liquidity is a concern, the analyst may also consider 

requesting interim reporting from the insurer on areas of risk specific to that 

insurer. Analysts will consider whether an insurer’s liquidity has been 

negatively impacted by any material changes in (1) cash inflows as a result of 

changes in reinsurance, and/or (2) cash outflows as a result of changes in 

reinsurance recoverable. Insurers also provide information to regulators 

regarding cash flow and liquidity within the ORSA filing.

In addition, the timing of recoveries by a ceding insurer under reinsurance 

agreements is a critical consideration in the reporting of credit for reinsurance. 

Contractual features that delay timely reimbursement to the ceding insurer 

violate statutory risk transfer requirements and the conditions of reinsurance 

accounting. State insurance regulators also collect information that allows for 

slow-payment analysis on reinsurance recoverables on a reinsurer-by-reinsurer 

basis. This analysis further enhances the assessment of counterparty risk 

exposure to the ceding insurer, which is a consideration in liquidity analysis. 

13.6 Where risk transfer to the capital markets is permitted, supervisors are 

able to understand the structure and operation of such arrangements and 

to assess issues which may arise.

13.6 States: As discussed under previous responses, an insurer’s reinsurance 

program is an important consideration within the risk-focused surveillance 

process. A summary of the applicant’s reinsurance program, listing all 

reinsurance agreements and providing a basic explanation of each agreement 

is provided by an insurer upon application for a license to transact insurance 

business. Upon granting a license, the state’s financial analysis department 

will perform quarterly reviews of the insurer’s financial statements (and 

related available information) to determine how the company is performing 

against its projected plan. The insurer’s quarterly financial statements will 

highlight any new reinsurance counterparties. 

States employ general procedures with respect to the review of reinsurance 

agreements and trust agreements. The NAIC and state insurance regulators 

have monitored the recent significant increase in the use of alternative risk 

transfer structures by ceding insurers, and as a result intend to propose 

enhanced guidance within the Financial Analysis Handbook in 2014 to 

incorporate more specific guidance with respect to analysis of agreements that 
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transfer insurance risk to capital market structures. 

ICP 14 Valuation

14 The supervisor establishes requirements for the valuation of assets and 

liabilities for solvency purposes.

14 FRB: As noted in the response to ICP 17, the FRB has the authority to 

impose capital requirements on BHCs and SLHCs that are or control 

insurance companies and nonbank financial companies. Those requirements 

remain under development. In building out its capital adequacy framework 

for group solvency, the FRB will consider requirements for valuation of assets 

and liabilities. 

States: The NAIC Accounting Practices and Procedures Manual (APPM) is 

a codification of insurance regulatory requirements (collectively referred to as 

Statutory Accounting Principles (SAP). As noted in the APPM, the primary 

responsibility of each state insurance department is to regulate insurance 

companies in accordance with state laws with an emphasis on solvency for the 

protection of policyholders. The ultimate objective of solvency regulation is 

to ensure that policyholder and contract holder and other legal obligations are 

met when they come due and that companies maintain capital and surplus at 

all times and in such forms as required by statute to provide an adequate 

margin of safety. The cornerstone of solvency measurement is financial 

reporting. Therefore the regulator’s ability to effectively determine relative 

financial condition using financial statements is of paramount importance to 

the protection of policyholders.

The APPM consists primarily of “Statements of Statutory Accounting 

Principles (SSAPs), which are the primary accounting practices and 

procedures promulgated by the NAIC. The valuation requirements for assets 

and liabilities are detailed within SSAPs pursuant to the three Statements of 

Statutory Accounting Concepts detailed within the APPM Preamble:

 Conservatism: Statutory Accounting should be reasonably 

conservative over the span of economic cycles and in recognition of 

the primary responsibility to regulate for financial solvency. Valuation 

procedures should, to the extent possible, prevent sharp fluctuations in 

surplus. 

 Consistency: The regulator’s need for meaningful, comparable 

financial information to determine an insurer’s financial condition 
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requires consistency in the development and application of statutory 

accounting principles. 

 Recognition: 1) Assets having economic value other than those which 

can be used to fulfill policyholder obligations, or those assets which 

are unavailable due to encumbrances or other third party interests 

should not be recognized on the balance sheet but rather should be 

charged against surplus when acquired or when availability otherwise 

becomes questionable. 2) Liabilities require recognition as they are 

incurred. 3) Revenue should be recognized only as the earnings 

process of the underlying underwriting or investment business is 

completed. 

14.1 The valuation addresses recognition, derecognition and measurement of 

assets and liabilities.

14.1 States: See response to ICP 14. The SSAPs prescribe the accounting and 

reporting requirements for assets and liabilities. Specific SSAPs detail the 

definition of assets and liabilities and the accounting for 

transfers/extinguishments, with specific SSAPs on various assets to detail 

reporting specifics, including but not limited to: acquisition, measurement 

method, valuation, impairment, income recognition, and disclosures.

14.2 The valuation of assets and liabilities is undertaken on consistent bases.

14.2 States: See response to ICP 14 & ICP/Std. 14.1. The NAIC Statutory 

Statements of Concepts includes “consistency.” Accounting provisions within 

the APPM are established in accordance with the “regulator’s need for 

meaningful, comparable financial information.” 

The codification of NAIC SAP did not pre-empt state legislative and 

regulatory authority. States may “prescribe” or “permit” accounting practices 

that vary from NAIC SAP. 

Prescribed Practice – Accounting practices that are incorporated directly or by 

reference by state laws, regulations and general administrative rules applicable 

to all insurance enterprises domiciled in a particular state.

 Permitted Practice – Accounting practice specifically requested by an 

insurer that departs from NAIC SAP and state prescribed accounting 

practices, which has been approved from the insurer’s domiciliary 
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regulatory authority. Pursuant to the SAP, no domiciliary state 

regulator shall grant an approval to use an accounting practice unless it 

provides advance notice to all other states in which the insurer is 

licensed with the following information:

 Nature and clear description of the permitted accounting practice 

request;

 Quantitative effect of the permitted accounting practice with all 

other approved permitted accounting practices currently in effect;

 Effect of the requested permitted accounting practice on a legal 

entity basis and on all parent and affiliated U.S. insurance 

companies;

 The effect, and the quantitative impact, to each financial statement 

line item affected by the request. 

If a reporting entity employs accounting practices that depart from the NAIC 

APPM (prescribed or permitted), disclosure of the following information is 

required at the date each financial statements is presented:

 Description of accounting practice;

 Statement that the accounting practice differs from NAIC SAP;

 Monetary effect on net income and statutory surplus of using an 

accounting practice which differs from NAIC SAP; and

 If an insurance enterprise’s risk-based capital would have triggered a 

regulatory event had it not used a prescribed or permitted practice.

14.3 The valuation of assets and liabilities is undertaken in a reliable, decision 

useful and transparent manner.

14.3 States: See response to ICP 14 & ICP/Std.14.1. The SAP Statement of 

Concepts incorporates by reference FASB Concept Statements One, Two, 

Five and Six to the extent they do not conflict with the SAP concepts. The 

intent of FASB Concept Statement Two identifies characteristics that make 

accounting information useful:

 Relevant – Information must be timely and it must have predictive 
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value or feedback value or both. 

 Reliable – Information must have representational faithfulness and it 

must be verifiable and neutral.

 Comparability & Consistency – Information gains greatly in 

usefulness if it can be compared with similar information about other 

enterprises and with the same enterprise for some other period or some 

other point of time. 

The Statutory Accounting Principles (E) Working Group has the 

responsibility of developing and revising SSAPs pursuant to the NAIC Policy 

Statement on Maintenance of Statutory Accounting Principles and the NAIC 

Open Meetings policy. 

14.4 The valuation of assets and liabilities is an economic valuation.

14.4 States: Pursuant to ICP 14, an economic-basis includes amortized cost 

valuations and market-consistent valuations. 

The SSAPs prescribed accounting valuations that reflect amortized cost or fair 

value, with impairment assessments. The determinants of the asset 

measurement method includes considerations of asset and liability matching 

(e.g., bonds held at amortized cost to match the tenure of insurance liabilities), 

as well as the risk assessment of the investment. Liabilities are defined under 

statutory accounting as certain or probable future sacrifices of future benefits 

and must be recorded when incurred. Liabilities are recorded at expected cost. 

The SAP fair value calculation of investments adopts, with modification to 

exclude the consideration of non-performance risk (own credit risk), the 

GAAP provisions for the definition and determination of fair value. This 

definition identifies that fair value is the price that would be received to sell or 

paid to transfer a liability in an orderly transaction between market 

participants at the measurement date. 

14.5 An economic valuation of assets and liabilities reflects the risk-adjusted 

present values of their cash flows.

14.5 States: See response to ICP/Std. 14.4. As noted for assets, amortized cost or 

fair value are prescribed accounting valuations within the SSAPs. These 

measurement methods are determined in accordance with the nature of the 

investments. These valuation measures require impairment assessments, with 
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recognition of other-than-temporary impairments within the confines of the 

SSAPs. 

P&C technical provisions: Reporting (in Schedule P) is required such that 

risk-adjusted present values of cash flows can be estimated by a user of the 

annual statement. The value reported on the balance sheet is the full 

settlement value discounted only when the payments are fair and 

determinable.

14.6 The value of technical provisions and other liabilities does not reflect the 

insurer’s own credit standing.

14.6 States: Pursuant to SSAP No. 100—Fair Value Measurements, paragraph 14: 

Consideration of non-performance (own credit risk) should not be reflected in 

the fair value calculation of liabilities (including derivative liabilities) at 

subsequent measurement. At initial recognition, it is perceived that the 

consideration of own-credit risk may be inherent in the contract negotiations 

resulting in the liability. The consideration of non-performance risks for 

subsequent measurement is inconsistent with the conservatism and recognition 

concepts as well as the assessment of financial solvency for insurers, as a 

decrease in credit standing would effectively decrease reported liabilities and 

thus seemingly increase the appearance of solvency. Furthermore, liabilities 

reported or disclosed at “fair value” shall not reflect any third-party credit 

guarantee of debt. 

14.7 The valuation of technical provisions exceeds the Current Estimate by a 

margin (Margin over the Current Estimate or MOCE).

14.7 States: For P&C technical provisions, valuation includes a margin over a 

current estimate, such that the regulatory assumption is that the margin equals 

the amount of otherwise applicable current value discount. For life insurance 

technical provisions (reserves), a margin exists over the current estimate. See

description of asset adequacy testing of the minimum formula reserve in 

response to ICP/Std. 14.9.

14.8 The Current Estimate reflects the expected present value of all relevant 

future cash flows that arise in fulfilling insurance obligations, using 

unbiased, current assumptions.
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14.8 States: The P&C technical provisions can be calculated using numerous 

methodologies, all which aim to calculate the ultimate settlement value 

(thereby including all relevant future cash flows). 

For life insurance technical provisions (reserves), the asset adequacy testing 

requires the calculation of the expected present value of all relevant future 

cash flows using unbiased current assumptions. See description of asset 

adequacy testing in the response to ICP/Std. 14.9.

14.9 The MOCE reflects the inherent uncertainty related to all relevant future 

cash flows that arise in fulfilling insurance obligations over the full time 

horizon thereof.

14.9 States: For P&C technical provisions, the regulatory assumption is that the 

margin equals the amount of otherwise applicable current value discount.

In the United States, the Standard Valuation Law (Model Law 820) specifies 

minimum requirements for technical provisions (reserves) for life insurance. 

The minimum technical provisions (reserves) are established by a formula 

consisting of a reserve method, valuation mortality table and valuation interest 

rate. Therefore the minimum formula reserve has implicit margins built in. 

For example the valuation mortality table is based in insurance industry 

experience with specific margins added in. The valuation interest rate is 

generally a conservative (low) interest rate. The formula reserves ignore other 

policy owner behavior such as lapsing the policy, etc. Not allowing such 

other decrements adds an implicit margin in the reserve calculation. However, 

the minimum formula reserve may not be adequate in all situations and 

therefore, the minimum technical provisions (reserves) are subject to asset 

adequacy testing to determine if the minimum formula reserve is adequate 

given the assets the company owns that fund the reserve to fulfill insurance 

obligations over the full time horizon. This asset adequacy testing accounts for 

all liability and asset cash flows to determine if the implicit margin over 

current estimate is adequate. If the formula reserve is not adequate (based on 

asset adequacy testing) an additional reserve is required to be established.

Section 3 of the Standard Valuation Law states as follows: 

Section 3. Actuarial Opinion of Reserves

A. Actuarial Opinion Prior to the Operative Date of the Valuation 

Manual
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(1) General

Every life insurance company doing business in this 

state shall annually submit the opinion of a qualified 

actuary as to whether the reserves and related actuarial 

items held in support of the policies and contracts 

specified by the commissioner by regulation are 

computed appropriately, are based on assumptions that 

satisfy contractual provisions, are consistent with prior 

reported amounts and comply with applicable laws of 

this state. The commissioner shall define by regulation 

the specifics of this opinion and add any other items 

deemed to be necessary to its scope.

(2) Actuarial Analysis of Reserves and Assets Supporting 

Reserves

(a) Every life insurance company , except as 

exempted by regulation , shall also annually 

include in the opinion required by Subsection 

(1) of this section, an opinion of the same 

qualified actuary as to whether the reserves and 

related actuarial items held in support of the 

policies and contracts specified by the 

commissioner by regulation, when considered in 

light of the assets held by the company with 

respect to the reserves and related actuarial 

items, including but not limited to the 

investment earnings on the assets and the 

considerations anticipated to be received and 

retained under the policies and contracts, make 

adequate provision for the company’s 

obligations under the policies and contracts, 

including but not limited to the benefits under 

and expenses associated with the policies and 

contracts.(b) The commissioner may provide 

by regulation for a transition period for 

establishing any higher reserves that the 

qualified actuary may deem necessary in order 

to render the opinion required by this section.
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14.10 The valuation of technical provisions allows for the time value of money. 

The supervisor establishes criteria for the determination of appropriate 

rates to be used in the discounting of technical provisions.

14.10 States: In the United States, the Standard Valuation Law (Model Law 820) 

specifies minimum requirements for technical provisions (reserves) for life 

insurance. Section 4b specifies how the valuation interest rate (time value of 

money) is to be determined. This section states:

 B. Calendar Year Statutory Valuation Interest Rates

(1) The calendar year statutory valuation interest rates, I, 

shall be determined as follows and the results rounded 

to the nearer one-quarter of one percent (1/4 of 1%):

(a) For life insurance:

( .09)

2

.03 ( .03)    1    R2 

W

I W R

(b) For single premium immediate annuities and for 

annuity benefits involving life contingencies 

arising from other annuities with cash settlement 

options and from guaranteed interest contracts 

with cash settlement options:

I .03W (R .03)

Where 

R1

is the lesser of 

R

and .09,

R2

is the greater of 

R

and .09,

R

is the reference interest rate defined in 

this section,

W

is the weighting factor defined in this 

section;

(c) For other annuities with cash settlement options 

and guaranteed interest contracts with cash 

settlement options, valued on an issue year 

basis, except as stated in Subparagraph (b) 

above, the formula for life insurance stated in 
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Subparagraph (a) above shall apply to annuities 

and guaranteed interest contracts with guarantee 

durations in excess of ten (10) years and the 

formula for single premium immediate annuities 

stated in Subparagraph (b) above shall apply to 

annuities and guaranteed interest contracts with 

guarantee duration of ten (10) years or less;

(d) For other annuities with no cash settlement 

options and for guaranteed interest contracts 

with no cash settlement options, the formula for 

single premium immediate annuities stated in 

Subparagraph (b) above shall apply.

(e) For other annuities with cash settlement options 

and guaranteed interest contracts with cash 

settlement options, valued on a change in fund 

basis, the formula for single premium 

immediate annuities stated in Subparagraph (b) 

above shall apply.

(2) However, if the calendar year statutory valuation 

interest rate for a life insurance policy issued in any 

calendar year determined without reference to this 

sentence differs from the corresponding actual rate for 

similar policies issued in the immediately preceding 

calendar year by less than one-half of one percent (1/2 

of 1%), the calendar year statutory valuation interest 

rate for the life insurance policies shall be equal to the 

corresponding actual rate for the immediately preceding 

calendar year. For purposes of applying the 

immediately preceding sentence, the calendar year 

statutory valuation interest rate for life insurance 

policies issued in a calendar year shall be determined 

for 1980 (using the reference interest rate defined in 

1979) and shall be determined for each subsequent 

calendar year regardless of when Section 5c of the 

Standard Non-forfeiture Law for Life Insurance as 

amended becomes operative. 

C. Weighting Factors

(1) The weighting factors referred to in the formulas 

stated above are given in the following tables:(a)
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Weighting Factors for Life Insurance:

Guarantee Duration 

(Years) 

Weighting Factors

10 or less .50

More than 10, but not 

more than 20

.45

More than 20 .35

For life insurance, the guarantee duration is the maximum number of years the 

life insurance can remain in force on a basis guaranteed in the policy or under 

options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy.

For P&C under statutory accounting, with the exception of fixed and 

reasonably determinable payments such as those emanating from workers’ 

compensation tabular indemnity reserves and long-term disability claims, 

reserves shall not be discounted. For contacts that qualify for discounting, and 

if state exceptions are made to allow discounting for non-tabular reserves, 

specific financial statement disclosures are required. 

Under U.S. GAAP, most short-duration contracts such as many property and 

liability insurance contracts claim liabilities are not discounted. Pursuant to 

the SEC Staff Position with respect to discounting claims liabilities related to 

short-duration insurance contracts, the SEC staff has noted that they will raise 

no objection if a registrant follows a policy for GAAP reporting purposes of: 

 Discounting liabilities for unpaid claims and claim adjustment 

expenses at the same rates that it uses for reporting to state 

regulatory authorities with respect to the same claims liabilities, or

 Discounting liabilities with respect to settled claims under the 

following circumstances:

(1) The payment pattern and ultimate cost are fixed and 

determinable on an individual claim basis, and

(2) The discount rate used is reasonable on the facts and

circumstances applicable to the registrant at the time the claims are 

settled. 
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Discounting for short-duration contracts was a key discussion point in the 

FASB 2013 Insurance Contracts exposure draft. As noted by the FASB in 

their related “Comment letter and Other Feedback Summary,” while most 

responders agreed with the concept of the time value of money, the responders 

noted that discounting the liability for incurred claims would be costly and not 

provide decision-useful information because: 

 There is uncertainty in both the amount and the timing of claim 

payments, which causes significant subjectivity and variability in the 

calculated discount. 

 It is not consistent with the property and casualty business model 

where claims are typically managed internally, analyzed externally, 

and ultimately settled all on a nominal (that is, undiscounted) basis. 

 The financial condition of a reporting entity would be overstated if 

reserves are recorded at a discounted amount, and that may increase 

the perceived financial risk of insurance entities.

The FASB also noted field testing results, which highlighted the variability in 

the calculated discount on the liability for incurred claims.

14.11 The supervisor requires the valuation of technical provisions to make

appropriate allowance for embedded options and guarantees.

14.11 States: Section 7.C. of the Model Regulation 822 titled “Actuarial Opinion 

and Memorandum Regulation” states the following:

Details of the Regulatory Asset Adequacy Issues Summary

(1) The regulatory asset adequacy issues summary shall 

include:

(a) Descriptions of the scenarios tested (including 

whether those scenarios are stochastic or 

deterministic) and the sensitivity testing done 

relative to those scenarios. If negative ending 

surplus results under certain tests in the 

aggregate, the actuary should describe those 

tests and the amount of additional reserve as of 

the valuation date which, if held, would 

eliminate the negative aggregate surplus values. 

Ending surplus values shall be determined by 
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either extending the projection period until the 

in force and associated assets and liabilities at 

the end of the projection period are immaterial 

or by adjusting the surplus amount at the end of 

the projection period by an amount that 

appropriately estimates the value that can 

reasonably be expected to arise from the assets 

and liabilities remaining in force.

(b) The extent to which the appointed actuary uses 

assumptions in the asset adequacy analysis that 

are materially different than the assumptions 

used in the previous asset adequacy analysis;

(c) The amount of reserves and the identity of the 

product lines that had been subjected to asset 

adequacy analysis in the prior opinion but were 

not subject to analysis for the current opinion;

(d) Comments on any interim results that may be of 

significant concern to the appointed actuary. 

For example, the impact of the insufficiency of 

assets to support the payment of benefits and 

expenses and the establishment of statutory 

reserves during one or more interim periods;

(e) The methods used by the actuary to recognize 

the impact of reinsurance on the company’s cash 

flows, including both assets and liabilities, 

under each of the scenarios tested; and

(f) Whether the actuary has been satisfied that all 

options whether explicit or embedded, in any 

asset or liability (including but not limited to 

those affecting cash flows embedded in fixed 

income securities) and equity-like features in 

any investments have been appropriately 

considered in the asset adequacy analysis.

(2) The regulatory asset adequacy issues summary shall 

contain the name of the company for which the 

regulatory asset adequacy issues summary is being 

supplied and shall be signed and dated by the appointed 
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actuary rendering the actuarial opinion.

ICP 15 Investment

15 The supervisor establishes requirements for solvency purposes on the 

investment activities of insurers in order to address the risks faced by 

insurers.

15 FRB: As noted in the response to ICP 17, the FRB has the authority to 

impose capital requirements on BHCs and SLHCs that are or control 

insurance companies and nonbank financial companies. Those requirements 

remain under development. In building out its capital adequacy framework 

for group solvency, the FRB will consider requirements for valuation of assets 

and liabilities. 

States: State laws and regulations, along with NAIC guidance on investments 

and investment risks, focus on the investment activities and investment risks 

of insurers through state investment laws, Statutory Accounting Principles,

and financial statement reporting requirements. Insurers are required to report 

each individual investment in detailed investment schedules. These 

investments are also divided into different asset classes for ease of review. 

Investments are subject to specific guidelines for what are admitted assets for 

purposes of calculating surplus and capital, and are also subject to specific 

valuation rules. Beyond reporting and valuation, as a second leg, insurers’ 

investments are also considered individually and as asset classes for purposes 

of capital and reserving requirements. Finally, financial analysts and 

insurance examiners have at their disposal guidance and recommendations for 

considering the specific risks of different types of investments as well as 

valuation metrics in technical handbooks, and through different tools that are 

available only to regulators. This handbook guidance assists regulators in a 

risk-focused approach towards their review of the investment characteristics 

of insurer portfolios. Risks highlighted in the handbooks include those related 

to concentration and liquidity in the portfolio overall and in relation to the 

nature of the insurer’s liabilities. The tools for monitoring investment risks 

are maintained on an ongoing basis by several different regulator committees 

at the NAIC. Statutory accounting guidance, the risk-based capital 

framework, as well as basic analysis and examination guidance have all been 

adopted by the various jurisdictions and are also part of the accreditation 

process. There is no additional legislative action required when NAIC 

committees adopt modifications to stay current with the evolving marketplace 

because all jurisdictions have adopted the relevant and required models. 

Therefore any changes adopted by the relevant NAIC committees are 
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automatically included in state guidance. 

15.1 The supervisor establishes requirements that are applicable to the 

investment activities of the insurer.

15.1 States: State investment laws may include specific investment limits for the 

insurers domiciled in that state. Broader requirements giving regulators the 

tools for oversight of investment activities of insurance companies have been 

adopted by all member states and are contained within statutory accounting 

principles, the risk-based capital framework and examination standards of the 

NAIC. 

15.2 The supervisor is open and transparent as to the regulatory investment 

requirements that apply and is explicit about the objectives of those 

requirements.

15.2 States: Requirements under statutory accounting principles and the riskbased capital framework as they relate to investments are contained in public 

documents. Discussions related to that guidance including any that may result 

in changes to that guidance are all held in public sessions as per the open 

meetings policy of the NAIC.

15.3 The regulatory investment requirements address at a minimum, the 

 Security; 

 Liquidity; and 

 Diversification; 

of an insurer’s portfolio of investments as a whole.

15.3 States: Different aspects of investment risk, whether for individual 

investments, as is the case for credit risk, or for portfolios, as is more 

appropriate for risks such as liquidity or concentration, are addressed in 

different parts of the regulatory framework. Each of the three legs, reporting 

and valuation, risk-based capital, and analysis and examination, work together 

to support the overall goals.

15.4 The supervisor requires the insurer to invest in a manner that is 
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appropriate to the nature of its liabilities.

15.4 States: The insurer is subject to off-site and on-site inspections where 

investment practices are examined. The profile of the insurer’s investments is 

analyzed with consideration given to the nature and extent of risks taken in the 

current market environment, duly taking into account potential liquidity 

needs. The insurer’s Investment Policy Statement is reviewed along with the 

jurisdiction’s investment laws which generally differ based on insurer type. 

For example, for life companies, the actuarial opinion contains the appointed 

actuary’s opinion with respect to the adequacy of the supporting assets to 

mature the liabilities. Asset-liability management is a key aspect of the riskfocused examination process and is also strongly considered in the Own Risk 

and Solvency Assessment (ORSA). 

15.5 The supervisor requires the insurer to invest only in assets whose risks it 

can properly assess and manage.

15.5 States: The supervisor requires the insurer to have the requisite knowledge to 

understand the nature and complexity of its investments. Pursuant to the 

Hazardous Financial Condition Model Regulation (#385), the supervisor will 

consider “whether the management of an insurer, including officers, directors, 

or any other person who directly or indirectly controls the operation of the 

insurer, fails to possess and demonstrate the competence, fitness and 

reputation deemed necessary to serve the insurer in such position.”

Statutory Accounting Principles are explicit in determining what are admitted 

assets for purposes of calculating surplus and capital. Admitted assets are in 

turn assigned a risk-based capital factor. Excessive exposure to investments 

with higher risk could result in an insurer being deemed weakly capitalized 

and subject to increased regulatory oversight.

15.6 The supervisor establishes quantitative and qualitative requirements, 

where appropriate, on the use of more complex and less transparent 

classes of assets and investment in markets or instruments that are 

subject to less governance or regulation.

15.6 States: While individual jurisdictions have specific limits on investments, 

assets classes and investment practices, general NAIC guidance focuses on 

appropriate, yet conservative, reporting and valuation requirements, including 

the aforementioned determinations of admitted assets. For admitted assets, 
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capital and reserving requirements focus on the specific risks of the individual 

investments. Detailed reporting requirements highlight an insurer’s 

involvement in potentially volatile areas, including the use of derivatives. 

Guidance for examiners highlights the importance of risk-focused 

examinations, in particular on those areas of an investment portfolio or 

investment strategy that may put the insurer at risk.

ICP 16 Enterprise Risk Management for Solvency Purposes

16 The supervisor establishes enterprise risk management requirements for 

solvency purposes that require insurers to address all relevant and 

material risks.

16 FRB: The FRB places significant supervisory emphasis on the adequacy of 

an institution’s management of risk. The FRB expects organizations to have 

in place comprehensive risk management policies and processes for 

identifying, evaluating, monitoring and controlling or mitigating all material 

risks. In addition, the Dodd-Frank Act created specific risk management 

requirements for banking organizations with total assets greater than $50 

billion and nonbank financial companies. 

It should be noted that the essential components of an enterprise risk 

management framework appear either explicitly or implicitly throughout the 

FRB’s general guidance on risk management for the banking organizations 

under its supervisory jurisdiction. For example, the FRB’s Capital Plan (Plan)

for firms with assets of at least $50 billion requires firms to have risk 

management and capital planning policies to ensure that they have sufficient 

capital during normal and stressed conditions. The Plan states, in part: 

“BHCs should have risk-identification processes that ensure that all risks are 

appropriately accounted for when assessing capital needs. These processes 

should evaluate the full set of potential exposures...” 

As noted in the FRB’s response to ICP 17, capital adequacy requirements for 

SLHCs and nonbank financial companies remain under development. It is 

expected that the principles embodied in an enterprise risk management 

framework will be incorporated in the final rules.

States: Pursuant to the Risk Management and Own Risk and Solvency 

Assessment (RMORSA Model Act) adopted by the NAIC, states that have 

adopted similar legislation will be able to specifically require insurers to 

maintain a risk management framework for the purpose of identifying, 
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monitoring, assessing, managing and reporting on its material and relevant 

risks. As of July 2014, 19 states have adopted such legislation. 

16.1 The supervisor requires the insurer’s enterprise risk management 

framework to provide for the identification and quantification of risk 

under a sufficiently wide range of outcomes using techniques which are 

appropriate to the nature, scale and complexity of the risks the insurer 

bears and adequate for risk and capital management and for solvency 

purposes.

16.1 States: The RMORSA Model Act is not an overly prescriptive document and

contains principles under which insurers must file certain information 

supporting its ORSA filing. A separate document entitled “NAIC Own Risk 

and Solvency Assessment (ORSA) Guidance Manual” contains more specific 

guidance on the elements of an effective ERM framework, including risk 

culture and governance; risk identification and prioritization; risk appetite, 

tolerances and limits; risk management and controls; and risk reporting and 

communication. It also requires an insurer to analyze the results of risk 

exposures under both normal and stressed environments. An insurer that is 

subject to ORSA must conduct an ORSA consistent with a process 

comparable to the ORSA Guidance Manual. The ORSA Guidance Manual 

may be revised in the future based on evolving risks, but more likely is that 

our processes for supervisors’ review of ORSA summary reports will evolve, 

thus resulting in an ever-evolving dialogue between the regulator and the 

group. 

During the NAICs ORSA pilot programs in 2012 and 2013, insurance groups 

identified and quantified risks in a variety of ways; and in almost all cases, 

such information was reflective of the applicable scale and complexity of the 

insurance group. In those rare cases that it was not, the regulators notified the 

insurance groups of those facts for either immediate modification or future 

modification of such information in the reports and/or processes.

16.2 The supervisor requires the insurer’s measurement of risk to be 

supported by accurate documentation providing appropriately detailed 

descriptions and explanations of the risks covered, the measurement 

approaches used and the key assumptions made.

16.2 States: The RMORSA Model Act, in conjunction with the ORSA Guidance 

Manual, requires that adequate documentation be maintained as it relates to 

the measurement of risks (including measurement approaches used and key 
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assumptions made), among other things, associated with an ORSA filing.

16.3 The supervisor requires the insurer to have a risk management policy 

which outlines how all relevant and material categories of risk are 

managed, both in the insurer’s business strategy and its day-to-day 

operations.

16.3 States: As part of the ORSA Guidance Manual, Section 1 provides a 

description of the insurer’s enterprise risk management framework. It states, 

in part, “The ORSA Summary Report should describe how the insurer 

identifies and categorizes relevant and material risks and manages those risks 

as it executes its business strategy.”

16.4 The supervisor requires the insurer to have a risk management policy 

which describes the relationship between the insurer’s tolerance limits, 

regulatory capital requirements, economic capital and the processes and 

methods for monitoring risk.

16.4 States: As part of the ORSA Guidance Manual, the supervisor requires the 

insurer to have a risk management policy which describes the relationship 

between the insurer’s tolerance limits, regulatory capital requirements, 

economic capital and the processes and methods for monitoring risk. In 

addition to Section 1, Section 3 provides guidance on group assessment of risk 

capital and prospective solvency assessment.

16.5 The supervisor requires the insurer to have a risk management policy 

which includes an explicit asset-liability management (ALM) policy which 

clearly specifies the nature, role and extent of ALM activities and their 

relationship with product development, pricing functions and investment 

management.

16.5 States: The supervisor requires an actuarial opinion and memorandum. Part 

of this requirement includes an opinion paragraph expressing the appointed 

actuary’s opinion with respect to the adequacy of the supporting assets to 

mature the liabilities. The ERM framework does not explicitly have a 

requirement for asset liability matching but the actuarial opinion and 

memorandum requirement effectively addresses the need for asset liability 

matching. From an ERM perspective, each insurer should utilize assessment 

techniques that are appropriate to the risk profile of the insurer. Such 
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assessment techniques are subject to reporting under the RMORSA Model 

Act.

16.6 The supervisor requires the insurer to have a risk management policy 

which is reflected in an explicit investment policy which: 

 specifies the nature, role and extent of the insurer’s investment 

activities and how the insurer complies with the regulatory investment 

requirements established by the supervisor; and 

 establishes explicit risk management procedures within its investment 

policy with regard to more complex and less transparent classes of 

asset and investment in markets or instruments that are subject to less 

governance or regulation.

16.6 States: The RMORSA Model Act, along with its ORSA Guidance Manual, 

provides for the general ERM framework and the items described are 

minimum requirements. Section 2 of the ORSA Guidance Manual 

specifically mentions that examples of relevant risk categories may include, 

but are not limited to credit, market, liquidity, underwriting and operational 

risks. Rather than specifying investments as a covered element, which are 

instead covered by state investment laws and required reporting within the 

NAIC annual statement, it requires the risk identification and prioritization 

process that are key to the organization. It requires a formal risk appetite 

statement, associated risk tolerances and limits, risk strategy, and feedback 

loops as necessary elements of a robust ERM framework. It is anticipated that 

a risk management policy that explicitly covers investment risk would be part 

of the broader ERM framework. 

16.7 The supervisor requires the insurer to have a risk management policy 

which includes explicit policies in relation to underwriting risk.

16.7 States: The RMORSA Model Act, along with its ORSA Guidance Manual, 

provides for the general ERM framework and the items described are 

minimum requirements. Section 2 of the ORSA Guidance Manual 

specifically mentions that examples of relevant risk categories may include, 

but are not limited to credit, market, liquidity, underwriting, and operational 

risks. Rather than specifying underwriting as a covered element, it requires 

the risk identification and prioritization process that are key to the 

organization. It requires a formal risk appetite statement, associated risk 

tolerances and limits, risk strategy, and feedback loops as necessary elements 

of a robust ERM framework. It is anticipated that a risk management policy 
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that explicitly covers underwriting risk would be part of the broader ERM 

framework.

16.8 The supervisor requires the insurer to: 

 establish and maintain a risk tolerance statement which sets out its 

overall quantitative and qualitative risk tolerance levels and defines 

risk tolerance limits which take into account all relevant and material 

categories of risk and the relationships between them; 

 make use of its risk tolerance levels in its business strategy; and 

 embed its defined risk tolerance limits in its day-to-day operations via 

its risk management policies and procedures.

16.8 States: The RMORSA Model Act, along with its ORSA Guidance Manual, 

provide for the general ERM framework. One of the items specifically deals 

with risk appetite, tolerances, and limits, both quantitative and qualitative. It 

requires that tolerance levels be demonstrated in the insurer’s business 

strategy and day-to-day operations.

16.9 The supervisor requires the insurer's ERM framework to be responsive 

to changes in its risk profile.

16.9 States: The RMORSA Model Act, along with its ORSA Guidance Manual, 

requires that the ERM framework be responsive to change in the insurer’s risk 

profile. The ORSA Guidance Manual discusses how the ERM framework in 

an ORSA Summary Report, should at a minimum incorporate 5 key 

principles, including risk identification and prioritization, which is often the 

driving force on changes in risk profile.

16.10 The supervisor requires the insurer’s ERM framework to incorporate a 

feedback loop, based on appropriate and good quality information, 

management processes and objective assessment, which enables it to take 

the necessary action in a timely manner in response to changes in its risk 

profile.

16.10 States: The RMORSA Model Act, along with its ORSA Guidance Manual, 

requires that the ERM framework incorporate a feedback loop (flexibility in 

the framework to consider changes in the environment) enabling the insurer to 

take the necessary action in a timely manner in response to changes in its risk 
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profile. 

16.11 The supervisor requires the insurer to perform its own risk and solvency 

assessment (ORSA) regularly to assess the adequacy of its risk 

management and current, and likely future, solvency position.

16.11 States: The RMORSA Model Act, along with its ORSA Guidance Manual, 

requires the insurer to perform its own risk and solvency assessment annually 

to assess the adequacy of its risk management and current, and likely future, 

solvency position. 

16.12 The supervisor requires the insurer’s Board and Senior Management to 

be responsible for the ORSA.

16.12 States: In accordance with the RMORSA Model Act, the ORSA report shall 

include a signature of the insurer or insurance group’s chief risk officer or 

other executive having responsibility for the oversight of the insurer’s 

enterprise risk management process attesting to the best of his/her belief and 

knowledge that the insurer applies the enterprise risk management process 

described in the ORSA Summary Report. A copy of said report will be 

provided to the insurer’s board of directors or the appropriate committee 

thereof.

16.13 The supervisor requires the insurer’s ORSA to encompass all reasonably 

foreseeable and relevant material risks including, as a minimum, 

underwriting, credit, market, operational and liquidity risks and 

additional risks arising due to membership of a group. The assessment is 

required to identify the relationship between risk management and the 

level and quality of financial resources needed and available.

16.13 States: The RMORSA Model Act, along with its ORSA Guidance Manual, 

requires the insurer’s ORSA to encompass all reasonably foreseeable and 

relevant material risks including underwriting, credit, market, operational and 

liquidity risks and additional risks as the risk profile dictates. The assessment 

includes identifying the relationship between risk management and the level 

and quality of financial resources needed and available. 
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16.14 The supervisor requires the insurer to: 

 determine, as part of its ORSA, the overall financial resources it needs 

to manage its business given its own risk tolerance and business plans, 

and to demonstrate that supervisory requirements are met; 

 base its risk management actions on consideration of its economic 

capital, regulatory capital requirements and financial resources, 

including its ORSA; and 

 assess the quality and adequacy of its capital resources to meet 

regulatory capital requirements and any additional capital needs.

16.14 States: The RMORSA Model Act, along with its ORSA Guidance Manual, 

requires the insurer’s ORSA to determine the overall financial resources it 

needs to manage its business (given its own risk tolerance and business plans), 

demonstrate that supervisory requirements are met; base its risk management 

actions on consideration of its economic regulatory capital requirements and 

financial resources, and assess the quality and adequacy of its capital 

resources to meet regulatory capital requirements and any additional capital 

needs.

16.15 The supervisor requires: 

 the insurer, as part of its ORSA, to analyse its ability to continue in 

business, and the risk management and financial resources required 

to do so over a longer time horizon than typically used to determine 

regulatory capital requirements; 

 the insurer’s continuity analysis to address a combination of 

quantitative and qualitative elements in the medium and longer-term 

business strategy of the insurer and include projections of its future 

financial position and analysis of its ability to meet future regulatory 

capital requirements.

16.15 States: The RMORSA Model Act, along with its ORSA Guidance Manual, 

requires the insurer’s ORSA to analyse its ability to continue in business and 

the risk management and financial resources required to do so over a longer 

time horizon than typically used to determine regulatory capital requirements, 

and the insurer’s continuity analysis to address a combination of quantitative 

and qualitative elements and include projections of its future financial position 

and analysis of its ability to meet future regulatory capital requirements. 
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16.16 The supervisor undertakes reviews of an insurer's risk management 

processes and its financial condition, including the ORSA. Where 

necessary, the supervisor requires strengthening of the insurer’s risk 

management, solvency assessment and capital management processes.

16.16 States: The RMORSA Model Act, along with its ORSA Guidance Manual, 

acknowledges that the supervisor will conduct reviews of the insurer’s ERM 

framework as part of the risk-focused analysis and/or examination processes. 

The supervisor may also request supporting materials to supplement his/her 

understanding of information contained in the ORSA Summary Report. 

These materials may include risk management policies or programs, such as 

the insurer’s underwriting, investment, claims, asset-liability management, 

reinsurance counterparty and operational risk policies. Where appropriate and 

necessary, the supervisor may require strengthening of risk management, 

solvency assessment, and capital planning processes.

ICP 17 Capital Adequacy

17 The supervisor establishes capital adequacy requirements for solvency 

purposes so that insurers can absorb significant unforeseen losses and to 

provide for degrees of supervisory intervention.

17 States: The supervisor establishes “legal entity” capital adequacy 

requirements for solvency purposes so that insurers can absorb significant 

unforeseen losses and to provide for degrees of supervisory intervention. 

These capital adequacy requirements are required by the NAIC Risk Based 

Capital Model Law and have been adopted by all states. For all other 

insurance groups and as permitted within ICP 17, supervisors utilize a legal 

entity focus when performing a group-wide capital adequacy assessment. The 

insurance group is considered primarily as a set of interdependent legal 

entities. Insurance groups (and their subsidiaries) that conduct business 

internationally are subject to capital adequacy requirements of those countries 

in which they are domiciled. To the extent that U.S. insurers hold insurance 

company subsidiaries (regardless of their country of domicile), requisite RBC 

charges are placed on the carrying values of those subsidiaries.

FRB: The FRB and the other federal banking agencies (OCC and FDIC) 

revised their regulatory capital frameworks in July 2013. The FRB did not 

apply the rule to SLHCs. The FRB decided to consider further the 
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development of capital requirements consistent with section 171 of the DoddFrank Act (“Collins Amendment”)8

for SLHCs as well as for nonbank 

financial companies, taking into consideration information provided by the 

commenters during the rule-making process for finalizing the 2013 capital 

rule and information gained through the supervisory process. Capital 

adequacy requirements for SLHCs and nonbank financial companies remain 

under development.

17.1 The supervisor requires that a total balance sheet approach is used in the 

assessment of solvency to recognise the interdependence between assets, 

liabilities, regulatory capital requirements and capital resources and to 

require that risks are appropriately recognised.

17.1 States: The supervisor requires insurers to file financial statements on a 

statutory accounting principles basis. Statutory accounting principles have an 

extensive number of footnote and/or disclosure requirements including, the 

disclosure of off balance sheet activities and are an integral part of the 

financial statements, as filed. Statutory accounting principles embrace 

valuation principles (e.g., principles-based reserving for both life and nonlife 

insurers) and risk-based capital requirements. Supervisors require for certain 

groups the filing of combined financial statements for U.S. insurance groups 

(filed on a statutory basis) and annual consolidated audited financial 

statements which have been filed with the SEC. 

FRB: As discussed above in ICP 17, the FRB is considering issues that 

commenters raised arguing that the final capital rules for SLHCs and nonbank 

financial companies engaged in insurance activities should take into account 

insurance company liabilities and asset-liability matching practices, the risks 

associated with separate accounts, the interaction of consolidated capital 

requirements with the capital requirements of state insurance regulators, and 

differences in accounting practices for banks and insurance companies and 

their holding companies. 

17.2 The supervisor establishes regulatory capital requirements at a sufficient 

level so that, in adversity, an insurer’s obligations to policyholders will 

continue to be met as they fall due and requires that insurers maintain 

 

8

Section 171 of the Dodd-Frank Act requires that the FRB establish minimum leverage capital requirements and minimum riskbased capital requirements for depository institution holding companies and for financial companies designated by the FSOC 

that are not “less than” the minimum capital requirements for insured depository institutions. 12 U.S.C. § 5371. 
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capital resources to meet the regulatory capital requirements.

17.2 States: The supervisor has established “legal entity” regulatory capital 

requirements at a sufficient level so that, in adversity, an insurer’s obligations 

to policyholders will continue to be met as they fall due and requires that 

insurers maintain capital resources to meet the regulatory capital 

requirements. 

FRB: As noted in ICP 17, capital adequacy requirements for SLHCs and 

nonbank financial companies remain under development.

17.3 The regulatory capital requirements include solvency control levels which 

trigger different degrees of intervention by the supervisor with an 

appropriate degree of urgency and requires coherence between the 

solvency control levels established and the associated corrective action 

that may be at the disposal of the insurer and/or the supervisor.

17.3 States: The regulatory capital requirements include four levels of supervisory 

intervention. They include the Company Action Level, Regulatory Action 

Level, Authorized Control Level, and Mandatory Control Level; two action 

levels and two control levels. Beginning with the least invasive supervisory 

intervention, the Company Action Level, to the most invasive supervisory 

intervention, Mandatory Control Level, each level of action is associated with 

a corrective action that is demonstrably more challenging. There are time 

constraints with each level of action. There are no levels of supervisory 

intervention at the group level. To the extent that group solvency issues are 

identified, it would trigger a process of coordination and cooperation among 

different supervisors of a group. 

FRB: As noted in ICP 17, capital adequacy requirements for SLHCs and 

nonbank financial companies remain under development.

17.4 In the context of insurance legal entity capital adequacy assessment, the 

regulatory capital requirements establish: 

 a solvency control level above which the supervisor does not intervene 

on capital adequacy grounds. This is referred to as the Prescribed 

Capital Requirement (PCR). The PCR is defined such that assets will 

exceed technical provisions and other liabilities with a specified level 

of safety over a defined time horizon; 

 a solvency control level at which, if breached, the supervisor would 

invoke its strongest actions, in the absence of appropriate corrective 
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action by the insurance legal entity. This is referred to as the 

Minimum Capital Requirement (MCR). The MCR is subject to a 

minimum bound below which no insurer is regarded to be viable to 

operate effectively.

17.4 States: The risk-based capital requirements include a solvency control level 

(Company Action Level coupled with the Trend Test), above which a 

supervisor cannot intervene on the basis of capital. The risk-based capital 

requirements include a solvency control level, Mandatory Control Level, 

under which an insurer is no longer allowed to operate. 

FRB: As noted in ICP 17, capital adequacy requirements for SLHCs and

nonbank financial companies remain under development.

17.5 In the context of group-wide capital adequacy assessment, the regulatory 

capital requirements establish solvency control levels that are 

appropriate in the context of the approach to group-wide capital 

adequacy that is applied.

17.5 States: The Federal Reserve has the authority to promulgate group wide 

capital requirements for systemically important financial institutions 

designated by the FSOC. Insurance supervisors use a legal entity focus in a 

group-wide capital adequacy assessment as reflected in ICP 17. As the 

insurance group is considered a set of interdependent legal entities, heavy 

emphasis is placed on the review and regulatory approval of intragroup 

transactions. In addition, the Model Holding Company Act now contains the 

Enterprise Risk Report which requires the ultimate controlling person to 

identify the material risks within the insurance holding company system that 

could pose enterprise risk to the insurer.

FRB: As noted in ICP 17, capital adequacy requirements for SLHCs and 

nonbank financial companies remain under development.

17.6 The regulatory capital requirements are established in an open and 

transparent process, and the objectives of the regulatory capital 

requirements and the bases on which they are determined are explicit. In 

determining regulatory capital requirements, the supervisor allows a set 

of standardised and, if appropriate, other approved more tailored 
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approaches such as the use of (partial or full) internal models.

17.6 States: The regulatory capital requirements are established in an open and 

transparent process, allowing for input from a variety of stakeholders. The 

objectives of the regulatory capital requirements and the bases on which they 

are determined are explicit. In determining regulatory capital requirements, 

the supervisor requires a standard factor-based model and, if appropriate, 

other approved more tailored approaches such as the use of a “partial” internal 

model may be used. The use of something other than the standard factorbased model is subject to the same deliberative process and is established 

under the same open and transparent process.

FRB: The FRB is fully committed to transparency and due process in the 

development and promulgation of regulatory standards. The FRB is carefully 

considering the comments it has received regarding the application of section 

171 of the Dodd-Frank Act to BHCs and SLHCs that are significantly 

engaged in the insurance business. The FRB will continue to consider these 

issues seriously, as well as the potential implementation challenges for BHCs 

and SLHCs with insurance operations, as it determines how to move forward 

with respect to the proposed capital requirements.

17.7 The supervisor addresses all relevant and material categories of risk in 

insurers and is explicit as to where risks are addressed, whether solely in 

technical provisions, solely in regulatory capital requirements or if 

addressed in both, as to the extent to which the risks are addressed in 

each. The supervisor is also explicit as to how risks and their aggregation 

are reflected in regulatory capital requirements.

17.7 States: The supervisor addresses all relevant and material categories of risk 

and is explicit as to where risks are addressed. Property and health 

catastrophe risk, as well as operational risk, were recognized as material risks 

that were not explicitly addressed in the capital requirements, so factors for 

property catastrophe risk and operational risk are expected to be in place in the 

next few years. The supervisor is also explicit as to how risks and their 

aggregation are reflected in regulatory capital requirements. The RBC 

formula clearly articulates the aggregation of risks and their reflection in 

capital requirements. 

FRB: As noted in ICP 17, capital adequacy requirements for SLHCs and 

nonbank financial companies remain under development.
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17.8 The supervisor sets appropriate target criteria for the calculation of 

regulatory capital requirements, which underlie the calibration of a 

standardised approach. Where the supervisor allows the use of approved 

more tailored approaches such as internal models for the purpose of 

determining regulatory capital requirements, the target criteria 

underlying the calibration of the standardised approach are also used by 

those approaches for that purpose to require broad consistency among all 

insurers within the jurisdiction.

17.8 States: In the calculation of regulatory capital requirements, target criteria are 

generally defined on a risk by risk basis, not on an overall basis (among all 

risks combined). Among the assets between life and nonlife insurers, in 

general, the target criterion is fairly consistent. The calibration reflects the 

risk profile of the assets/liabilities supporting the business written; this 

includes an average holding period of the assets and average duration of the 

liabilities. 

FRB: As noted in ICP 17, capital adequacy requirements for SLHCs and 

nonbank financial companies remain under development.

17.9 Any variations to the regulatory capital requirement imposed by the 

supervisor are made within a transparent framework, are appropriate to 

the nature, scale and complexity according to the target criteria and are 

only expected to be required in limited circumstances.

17.9 States: Any variations to the regulatory capital requirement imposed by the 

supervisor are made within a transparent framework and are appropriate to the 

nature, scale and complexity according to the target criteria, and are only 

expected to be required in limited circumstances. Any variations will be 

disclosed in the financial statements filed with the supervisor. A recent 

example (recent global financial crisis) of a variation was the handling of 

RMBS securities for valuation purposes. The handling of this matter was 

clearly made in a transparent framework and included engagement from a 

variety of stakeholders. 

FRB: As noted in ICP 17, capital adequacy requirements for SLHCs and 

nonbank financial companies remain under development.

17.10 The supervisor defines the approach to determining the capital resources 

eligible to meet regulatory capital requirements and their value, 

consistent with a total balance sheet approach for solvency assessment 
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and having regard to the quality and suitability of capital elements.

17.10 States: The supervisor defines the approach to determining the capital 

resources eligible to meet regulatory capital requirements and their value, 

consistent with a total balance sheet approach and having regard to the quality 

and suitability of capital elements. The supervisor requires insurers to file 

financial statements in accordance with statutory accounting principles. With 

over 100 Statements of Statutory Accounting Principles, it is the framework 

for determining eligible capital resources for purposes of meeting regulatory 

capital requirements. 

FRB: As noted in ICP 17, capital adequacy requirements for SLHCs and 

nonbank financial companies remain under development.

17.11 The supervisor establishes criteria for assessing the quality and suitability 

of capital resources, having regard to their ability to absorb losses on 

both a going-concern and wind-up basis.

17.11 The supervisor requires insurers to file financial statements in accordance with 

Statutory Accounting Principles. Statutory Accounting Principles contain a 

Statement of Concepts, which establishes guiding principles for assessing the 

quality and suitability of capital resources. These include concepts such as 

conservatism, consistency, and recognition. The Statement of Concepts helps 

guide the development and maintenance of statutory accounting principles. 

FRB: As noted in ICP 17, capital adequacy requirements for SLHCs and 

nonbank financial companies remain under development.

17.12 Where a supervisor allows the use of internal models to determine 

regulatory capital requirements, the supervisor: 

 establishes appropriate modelling criteria to be used for the 

determination of regulatory capital requirements, which require 

broad consistency among all insurers within the jurisdiction; and 

 identifies the different levels of regulatory capital requirements for 

which the use of internal models is allowed.

17.12 States: Not Applicable.

FRB: As noted in ICP 17, capital adequacy requirements for SLHCs and 
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nonbank financial companies remain under development.

17.13 Where a supervisor allows the use of internal models to determine 

regulatory capital requirements, the supervisor requires: 

 prior supervisory approval for the insurer’s use of an internal model 

for the purpose of calculating regulatory capital requirements; 

 the insurer to adopt risk modelling techniques and approaches 

appropriate to the nature, scale and complexity of its current risks 

and those incorporated within its risk strategy and business objectives 

in constructing its internal model for regulatory capital purposes; 

 the insurer to validate an internal model to be used for regulatory 

capital purposes by subjecting it, as a minimum, to three tests: 

“statistical quality test”, “calibration test” and “use test”; and 

 the insurer to demonstrate that the model is appropriate for 

regulatory capital purposes and to demonstrate the results of each of 

the three tests.

17.13 States: Not Applicable.

FRB: As noted in ICP 17, capital adequacy requirements for SLHCs and 

nonbank financial companies remain under development.

17.14 Where a supervisor allows the use of internal models to determine 

regulatory capital requirements, the supervisor requires: 

 the insurer to conduct a "statistical quality test" which assesses the 

base quantitative methodology of the internal model, to demonstrate 

the appropriateness of this methodology, including the choice of 

model inputs and parameters, and to justify the assumptions 

underlying the model; and 

 that the determination of the regulatory capital requirement using an 

internal model addresses the overall risk position of the insurer and 

that the underlying data used in the model is accurate and complete.

17.14 States: Not Applicable.

FRB: As noted in ICP 17, capital adequacy requirements for SLHCs and 

nonbank financial companies remain under development.
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17.15 Where a supervisor allows the use of internal models to determine 

regulatory capital requirements, the supervisor requires the insurer to 

conduct a "calibration test" to demonstrate that the regulatory capital 

requirement determined by the internal model satisfies the specified 

modelling criteria.

17.15 States: Not Applicable.

FRB: As noted in ICP 17, capital adequacy requirements for SLHCs and 

nonbank financial companies remain under development.

17.16 Where a supervisor allows the use of internal models to determine 

regulatory capital requirements, the supervisor requires: 

 the insurer to fully embed the internal model, its methodologies and 

results, into the insurer’s risk strategy and operational processes (the 

"use test"); 

 the insurer's Board and Senior Management to have overall control of 

and responsibility for the construction and use of the internal model 

for risk management purposes, and ensure sufficient understanding of 

the model's construction at appropriate levels within the insurer's 

organisational structure. In particular, the supervisor requires the 

insurer’s Board and Senior Management to understand the 

consequences of the internal model's outputs and limitations for risk 

and capital management decisions; and 

 the insurer to have adequate governance and internal controls in 

place with respect to the internal model.

17.16 States: Not Applicable.

FRB: As noted in ICP 17, capital adequacy requirements for SLHCs and 

nonbank financial companies remain under development.

17.17 Where a supervisor allows the use of internal models to determine 

regulatory capital requirements, the supervisor requires the insurer to 

document the design, construction, and governance of the internal model, 

including an outline of the rationale and assumptions underlying its 

methodology. The supervisor requires the documentation to be sufficient 

to demonstrate compliance with the regulatory validation requirements 

for internal models, including the statistical quality test, calibration test 

and use test outlined above.
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17.17 States: Not Applicable.

FRB: As noted in ICP 17, capital adequacy requirements for SLHCs and 

nonbank financial companies remain under development.

17.18 Where a supervisor allows the use of internal models to determine 

regulatory capital requirements, the supervisor requires: 

 the insurer to monitor the performance of its internal model and 

regularly review and validate the ongoing appropriateness of the 

model’s specifications. The supervisor requires the insurer to 

demonstrate that the model remains fit for regulatory capital 

purposes in changing circumstances against the criteria of the 

statistical quality test, calibration test and use test;

 the insurer to notify the supervisor of material changes to the internal 

model made by it for review and continued approval of the use of the 

model for regulatory capital purposes; 

 the insurer to properly document internal model changes; and 

 the insurer to report information necessary for supervisory review 

and ongoing approval of the internal model on a regular basis, as 

determined appropriate by the supervisor. The information includes 

details of how the model is embedded within the insurer’s governance 

and operational processes and risk management strategy, as well as 

information on the risks assessed by the model and the capital 

assessment derived from its operation.

17.18 States: Not Applicable.

FRB: As noted in ICP 17, capital adequacy requirements for SLHCs and 

nonbank financial companies remain under development.

ICP 18 Intermediaries

18 The supervisor sets and enforces requirements for the conduct of 

insurance intermediaries, to ensure that they conduct business in a 

professional and transparent manner.

18 States: States have a structured system for the licensing and monitoring of 

intermediaries (commonly referred to as “producers” in the United States). 

The NAIC Producer Licensing Model Act provides the basis for the producer 
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licensing framework in the United States. This framework includes 

examination requirements, continuing education requirements for producers 

and broad regulatory discretion to deny, suspend or revoke an insurance 

producer’s license.

FRB: The FRB is not a licensing or regulatory authority for intermediaries. 

18.1 The supervisor ensures that insurance intermediaries are required to be 

licensed.

18.1 States: The NAIC Producer Licensing Model Act provides that all 

individuals who sell, solicit or negotiate insurance must be licensed. As part 

of this process, both the individual and the business entity through which the 

producer operates must be licensed. Licenses are issued by the following lines 

of authority: (1) life; (2) accident and health or sickness; (3) property; (4) 

casualty; (5) variable life and variable annuity products; and (6) personal 

lines.

18.2 The supervisor ensures that insurance intermediaries licensed in its 

jurisdiction are subject to ongoing supervisory review.

18.2 States: The national standard in the United States is that insurance producers 

are required to renew their licenses and complete 24 hours of continuing 

education every two years. In addition, U.S. insurance regulators have broad 

regulatory discretion regarding what activities warrant the 

suspension/revocation of an insurance producer’s license or the imposition of 

fines for engaging in misconduct. 

18.3 The supervisor requires insurance intermediaries to possess appropriate 

levels of professional knowledge and experience, integrity, and 

competence.

18.3 States: Resident applicants must pass a test to ensure a minimal level of 

competency. Tests are specific to the following lines of authority: (1) life; (2) 

accident and health or sickness; (3) property; (4) casualty; (5) variable life and 

variable annuity products; and (6) personal lines. To ensure producers are of 

sound moral character, applicants are asked a series of background questions 

which ask about prior misdemeanour convictions, felony convictions and 

involvement in administrative proceedings. Individuals who have been 

convicted of a felony involving “dishonesty or breach of trust” are prohibited 
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from engaging in the business of insurance unless they request and obtain a 

waiver to engage in the business of insurance. In addition to these strict 

standards, twenty-seven states fingerprint their applicants to identify any prior 

criminal activity. Finally, resident applicants must pass a test for each 

insurance line of authority they wish to sell, solicit or negotiate and complete 

24 hours of continuing education every two years, with 3 of the 24 hours of 

continuing education addressing ethics.

18.4 The supervisor requires that insurance intermediaries apply appropriate 

corporate governance.

18.4 States: Insurance producers may work as “independent producers”, who 

represent multiple companies, or may work as “captive producers” and 

represent only one company. Forty-two states and the District of Columbia 

require producers to obtain formal appointments with the companies they 

represent. Insurance companies are then required to notify each state in which 

the producer will be selling, soliciting, or negotiating insurance of the 

appointment. Producers are subject to the relevant governance measures of 

the insurers which they represent. The behavior of and processes used by 

producers are assessed as part of the supervisory review process. State 

insurance regulators can also undertake investigations of producers, which can 

focus on issues of governance, if concerns arise. 

18.5 The supervisor requires insurance intermediaries to disclose to 

customers, at a minimum: 

 the terms and conditions of business between themselves and the 

customer; 

 the relationship they have with the insurers with whom they deal; and 

 information on the basis on which they are remunerated where a 

potential conflict of interest exists.

18.5 States: Insurance producers generally disclose associations through the 

normal course of business as insurance consumers need to understand what 

company will be underwriting the risk. The NAIC Producer Licensing Model 

Act provides that where an insurance producer receives compensation from 

the customer for the placement of insurance or represents the customer with 

respect to that placement, the producer shall not accept or receive any 

compensation from an insurer for that placement of insurance unless the 

producer has, prior to the customer’s purchase of insurance, obtained the 

customer’s documented acknowledgment that such compensation will be 
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received by the producer and disclosed the amount of compensation to be 

received from the insurer. 

18.6 The supervisor requires an insurance intermediary who handles client 

monies to have sufficient safeguards in place to protect these funds.

18.6 States: State statutes generally provide that funds received by any person 

acting as an insurance agent are received and held in a fiduciary capacity and 

shall be promptly accounted for and paid to the insurer. State insurance 

regulators may fine a producer, suspend or revoke a license because of the 

improperly withholding, misappropriating, or converting of any monies or 

properties received in the course of conducting insurance business. 

18.7 The supervisor takes appropriate supervisory action against licensed 

insurance intermediaries, where necessary, and has powers to take action 

against those individuals or entities that are carrying on insurance 

intermediation without the necessary licence.

18.7 States: States have broad discretion to fine, suspend, or revoke an insurance 

producer’s license. In addition, states have general authority to issue cease 

and desist orders to those individuals or entities carrying on insurance 

intermediation without the necessary license. 

The NAIC’s Producer Licensing Model Act sets forth that the insurance 

commissioner may place on probation, suspend, revoke or refuse to issue or 

renew an insurance producer’s license or may levy a civil penalty or any 

combination of actions, for any one or more of the following causes: (1) 

providing incorrect, misleading, incomplete or materially untrue information 

in the license application; (2) violating any insurance laws, or violating any 

regulation, subpoena or order of the insurance commissioner or of another 

state’s insurance commissioner; (3) obtaining or attempting to obtain a license 

through misrepresentation or fraud; (4) improperly withholding, 

misappropriating, or converting any monies or properties received in the 

course of doing insurance business; (5) intentionally misrepresenting the terms 

of an actual or proposed insurance contract or application for insurance; (6) 

having been convicted of a felony; (7) having admitted or been found to have 

committed any insurance unfair trade practice or fraud; (8) using fraudulent, 

coercive, or dishonest practices, or demonstrating incompetence, 

untrustworthiness, or financial irresponsibility in the conduct of business in 

this state or elsewhere; (9) having an insurance producer license, or its 

equivalent, denied, suspended, or revoked in any other state, province, district,
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or territory; or (10) forging another’s name to an application for insurance or 

to any document related to an insurance transaction. 

ICP 19 Conduct of Business

19 The supervisor sets requirements for the conduct of the business of 

insurance to ensure customers are treated fairly, both before a contract is 

entered into and through to the point at which all obligations under a 

contract have been satisfied.

19 States: State insurance regulators prohibit unfair trade practices in the 

business of insurance that constitute unfair methods of competition or unfair 

or deceptive acts or practices. These standards provide the foundation of state 

market conduct regulation and date back to 1947 when the NAIC adopted the 

Unfair Trade Practices Act. State insurance regulators have the authority to 

examine and investigate the activities of insurers and intermediaries to 

determine whether they are engaged in any unfair trade practices. 

Additionally, the NAIC adopted the Unfair Claims Settlement Practices Act in 

1990 in order to focus additional attention on unfair claims as a function of 

market conduct surveillance separate and apart from general unfair trade 

practices. 

State insurance regulators have the authority to analyse, examine and 

investigate the activities of insurers and intermediaries and use tools, such as 

the Market Conduct Annual Statement (MCAS) and other analysis (such as 

data calls and interrogatories) and on-site market conduct examinations to 

determine whether customers are being treated fairly.

FRB: The FRB does not supervise or regulate the conduct of the business of 

insurance. The states in which an insurance company operates or is organized 

regulate and supervise the conduct and operation of insurance companies.

19.1 The supervisor requires insurers and intermediaries to act with due skill, 

care and diligence when dealing with customers.

19.1 States: State insurance regulators require insurers and intermediaries to act 

with due skill, care, and diligence through state unfair trade practice standards. 

For example, it is an unfair trade practices to misrepresent the benefits, 

advantages, conditions or terms of any insurance policy, or provide any 
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advertisement which is untrue, deceptive or misleading. 

19.2 The supervisor requires insurers and intermediaries to establish and 

implement policies and procedures on the fair treatment of customers 

that are an integral part of their business culture.

19.2 States: State insurance regulators prohibit practices that misrepresent the 

benefits, advantages, conditions, or terms of any insurance policy, or provide 

any advertisement which is untrue, deceptive or misleading. An insurer’s or 

intermediary’s engagement in unfair trade practices may result in a monetary 

penalty, suspension or revocation of the insurer’s or intermediary’s license if 

such unfair trade practices are committed flagrantly and in conscious 

disregard or committed with such frequency to indicate a general business 

practice. U.S. insurance regulators use these tools to ensure that insurers and 

intermediaries give fair treatment of customers due regard as part of their 

business culture. 

Additionally, insurers’ practices are reviewed by state insurance regulators 

during their analysis and on-site examinations by reviewing items such as a 

company’s board minutes; underwriting, rating, claims and complaint 

handling manuals; communications to their staff and intermediaries; and other 

operational and management documents.

19.3 The supervisor requires insurers to take into account the interests of 

different types of customers when developing and marketing insurance 

products.

19.3 States: State insurance regulators require insurers to take into account the 

interests of different types of customers when developing their products. For 

example, regulators review rate filings to determine the consistency with 

statutory requirements and ensure they are not excessive, unjust, or unfairly 

discriminatory.

Additionally, state insurance regulators prohibit marketing materials to be 

untrue, deceptive, or misleading. Because of this, all marketing materials 

must meet certain minimum regulatory standards. At the same time, insurers 

may use different marketing strategies to target different segments of the 

market. 

19.4 The supervisor requires insurers and intermediaries to promote products 
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and services in a manner that is clear, fair and not misleading.

19.4 States: State insurance regulators prohibit any advertisements which are 

untrue, deceptive, or misleading. This includes prohibitions against 

misrepresenting the benefits, advantages, conditions, or terms of any policy; 

misrepresenting the dividends or share of the surplus to be received on any 

policy; using any name or title of any policy as to misrepresent its true nature; 

misrepresenting or providing any intentional misquote of premium rate, for 

the purpose of inducing the purchase, lapse, forfeiture, exchange, conversion,

or surrender of any policy. 

19.5 The supervisor sets requirements for insurers and intermediaries with 

regard to the timing, delivery, and content of information provided to 

customers at point of sale.

19.5 States: It is an unfair trade practice for a producer to misrepresent the 

benefits and conditions of a policy; insurers are also required to provide each 

consumer with a copy of their contract. State insurance regulators can use the 

product approval process and market conduct analysis and examination 

processes to assess the provision of information at the point of sale. 

The type and level of requirements for provision of information vary based on 

the line of business and the complexity of the product. For example, state 

insurance regulators require an applicant for an annuity contract to be 

provided at or before the time of application a disclosure document. At a 

minimum, the following information shall be included in the disclosure 

document: (1) the generic name of the contract, the company product name, if 

different, and form number, and the fact that it is an annuity; (2) the insurer’s 

legal name, physical address, website address and telephone number; and (3) a 

description of the contract and its benefits, emphasizing its long-term nature, 

including examples where appropriate. 

19.6 The supervisor requires insurers and intermediaries to ensure that, 

where customers receive advice before concluding an insurance contract, 

such advice is appropriate, taking into account the customer’s disclosed 

circumstances.

19.6 States: Producers have a responsibility to provide appropriate disclosure 

concerning the products they sell and their potential impact on the consumer if 

purchased as well as to assess the needs of their clients. U.S. insurance 
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regulators prohibit misrepresentation of the benefits, advantages or conditions 

or terms of any insurance policy. U.S. insurance regulators can use the market 

conduct analysis and examination processes to assess the provision of advice 

to customers.

The type and level of requirements for advice vary based on the line of 

business and the complexity of the product. For example, in recommending to 

a consumer the purchase of an annuity or the exchange of an annuity, the 

insurance producer or insurer must have reasonable grounds for believing that 

the recommendation is suitable for the consumer on the basis of the facts 

disclosed by the consumer as to his or her investments and other insurance 

products and as to his or her financial situation and needs. 

19.7 The supervisor requires insurers and intermediaries to ensure that, 

where customers receive advice before concluding an insurance contract, 

any potential conflicts of interest are properly managed.

19.7 States: Insurance producers generally disclose associations through the 

normal course of business as insurance consumers need to understand what 

company will be underwriting the risk. The Unfair Trade Practices Act

prohibits providing misleading information or making misrepresentations.

U.S. insurance regulators can use the market conduct analysis and 

examination processes to assess how conflicts of interest are managed.

The expectations on managing conflicts of interest vary based on the line of 

business and the complexity of the product. For example, for life and annuity 

replacements, consumers are notified to carefully consider whether a 

replacement is in their best interests, informed there may be acquisition costs 

and surrender costs, and that they may be able to make changes to their 

existing policy or contract to meet their insurance needs at less cost. In the 

case of an exchange or replacement of an annuity, the exchange or 

replacement must also be suitable and take into account whether the consumer 

will incur a surrender charge, be subject to a new surrender period, lose 

existing benefits, or be subject to increased fees.

19.8 The supervisor requires insurers to: 

 service policies appropriately through to the point at which all 

obligations under the policy have been satisfied; 

 disclose to the policyholder information on any contractual changes 

during the life of the contract; and 

 disclose to the policyholder further relevant information depending on 
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the type of insurance product.

19.8 States: State insurance regulators require insurers to service policies 

appropriately through to the point at which all obligations under the policy 

have been satisfied through enforcing standards addressing claims settlement 

practices. In addition, insurers must disclose to the policyholder information 

on any contractual changes and further relevant information through enforcing 

unfair trade practice standards. 

19.9 The supervisor requires that insurers have policies and processes in place 

to handle claims in a timely and fair manner.

19.9 States: Through the Unfair Claims Settlement Practices Act, U.S. insurance 

regulators define and prohibit the following as unfair claims settlement 

practices: (1) knowingly misrepresenting to claimants and insureds relevant 

facts or policy provisions relating to coverage at issue; (2) failing to 

acknowledge with reasonable promptness pertinent communications with 

respect to claims arising under its policies; (3) failing to adopt and implement 

reasonable standards for the prompt investigation and settlement of claims 

arising under its policies; (4) not attempting in good faith to effectuate prompt, 

fair and equitable settlement of claims submitted in which liability has become 

reasonably clear; (5) compelling insureds or beneficiaries to institute suits to 

recover amounts due under its policies by offering substantially less than the 

amounts ultimately recovered in suits brought by them; (6) refusing to pay 

claims without conducting a reasonable investigation; (7) failing to affirm or 

deny coverage of claims within a reasonable time after having completed its 

investigation related to such claim or claims; (8) attempting to settle or 

settling claims for less than the amount that a reasonable person would believe 

the insured or beneficiary was entitled by reference to written or printed 

advertising material accompanying or made part of an application; (9) 

attempting to settle or settling claims on the basis of an application that was 

materially altered without notice to, or knowledge or consent of, the insured; 

(10) making claims payments to an insured or beneficiary without indicating 

the coverage under which each payment is being made; (11) unreasonably 

delaying the investigation or payment of claims by requiring both a formal 

proof of loss form and subsequent verification that would result in duplication 

of information and verification appearing in the formal proof of loss form; 
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(12) failing in the case of claims denials or offers of compromise settlement to 

promptly provide a reasonable and accurate explanation of the basis for such 

actions; (13) failing to provide forms necessary to present claims within 

fifteen calendar days of a request with reasonable explanations regarding their 

use; and (14) failing to adopt and implement reasonable standards to assure 

that the repairs of a repairer owned by or required to be used by the insurer are 

performed in a workmanlike manner.

19.10 The supervisor requires that insurers and intermediaries have policies 

and processes in place to handle complaints in a timely and fair manner.

19.10 States: Through the Unfair Trade Practices Act, state insurance regulators 

require insurers to maintain a complete record of all the complaints received. 

This record must indicate the total number of complaints, their classification 

by line of insurance, the nature of each complaint, the disposition of each 

complaint, and the time it took to process each complaint. U.S. insurance 

regulators require insurers and intermediaries to acknowledge with reasonable 

promptness pertinent communications with respect to claims arising under its 

policies; adopt and implement reasonable standards for the prompt 

investigation and settlement of claims arising under its policies; and effectuate 

prompt, fair, and equitable settlement of claims. 

19.11 Legislation identifies provisions relating to privacy protection under 

which insurers and intermediaries are allowed to collect, hold, use or 

communicate personal information of customers to third parties.

19.11 States: State insurance regulators have established standards governing the 

treatment of non-public personal health information and non-public personal 

financial information about individuals. The NAIC has adopted the Insurance 

Information and Privacy Protection Model Act (Model #670), the Privacy of 

Consumer Financial and Health Information Regulation (Model #672) and the 

Standards for Safeguarding Consumer Information Model Regulation (Model 

#673). These standards require insurers and intermediaries to provide notice 

to individuals about their privacy policies and practices; describe the 

conditions under which they may disclose non-public personal health 

information and non-public personal financial information to affiliates and 

non-affiliated third parties; and provide methods for individuals to prevent 

disclosure of that information.

Additionally, there is federal legislation that addresses the privacy protection 

of personal information of customers, such as the Health Portability and 
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Accountability Act (HIPAA) and Gramm-Leach-Bliley Act. 

19.12 The supervisor requires insurers and intermediaries to have policies and 

procedures for the protection of private information on customers.

19.12 States: State insurance regulators require insurers and intermediaries to 

implement comprehensive written information security programs that include 

administrative, technical and physical safeguards for the protection of 

customer information. An information security program should be designed 

to ensure the security and confidentiality of customer information, protect 

against any anticipated threats or hazards to the security or integrity of the 

information; and protect against unauthorized access to or use of the 

information that could result in substantial harm or inconvenience to any 

customer.

19.13 The supervisor publicly discloses information that supports the fair 

treatment of customers.

19.13 States: State insurance regulators undertake a number of supervisory 

activities and consumer education initiatives to support the fair treatment of 

customers. 

State insurance regulators track unlawful unauthorized insurance activity, 

issue warnings to the public to be wary of those engaged in these activities, 

and take enforcement action, such as cease and desist orders, to stop them. 

U.S. insurance regulators, through the NAIC’s Consumer Information Source, 

provide consumers web-based access to key information about insurance 

companies, including closed insurance complaints, licensing information, and 

key financial data. In addition, consumers are able to access individual state 

insurance departments from the Consumer Information Source to obtain 

information on enforcement actions and closed market conduct examination 

reports. 

In addition, state insurance regulators maintain consumer information on their 

web sites, develop consumer brochures, and conduct in-person consumer 

outreach. Through the NAIC, states have conducted a national consumer 

educational campaign on fake insurance plans and created a program entitled 

Insure U, which is specifically designed to provide consumers with the 

knowledge needed to make wise buying decisions.

FRB: The FRB does not supervise or regulate the conduct of the business of 
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insurance. The states in which an insurance company operates or is organized 

regulate and supervise the conduct and operation of that insurance company.

ICP 20 Public Disclosure

20 The supervisor requires insurers to disclose relevant, comprehensive and 

adequate information on a timely basis in order to give policyholders and 

market participants a clear view of their business activities, performance 

and financial position. This is expected to enhance market discipline and 

understanding of the risks to which an insurer is exposed and the manner 

in which those risks are managed.

20 States: Legal entity insurers are required to utilize the NAIC Blank template 

for their annual and quarterly statutory statement filings. These are designed 

primarily for regulators, but the majority of contents are available to the public 

if they do not contain any confidential or proprietary data. The NAIC website 

– via the Consumer Information Source (CIS) – provides free financial 

information on all insurance entities that have submitted the NAIC Blank. In 

addition to providing demographic information (state of domicile, group 

information, contact details, etc.), this information includes assets, liabilities, 

liquidity ratio, direct premiums by line of business, invested asset mix, and 

three year trends for net premiums, policyholder surplus, and income and loss 

information. Policyholders, market participants, and the general public 

looking to obtain more information also have the ability to obtain the actual 

Blank filings for each insurance reporting entity.

The accounting utilized for the blank filings is statutory accounting, a codified 

body of accounting that considers U.S. GAAP but modifies or rejects it as 

appropriate for regulatory needs – with divergence from U.S. GAAP generally 

in accordance with the regulatory principle of conservatism.

The annual and quarterly statements provide the basic financial statement 

(balance sheet, income statement and cash flow), notes to financial statement, 

general interrogatories, a summary of premiums by state (and losses for nonlife) in Schedule T, a holding company organizational chart in Schedule Y, 

and detailed listings of investments purchased or sold during the period. The 

annual statement adds detailed listings of investments owned, detailed listings 

of reinsurance transactions, and various summary level schedules for 

premiums, claims and investment activity. The quarterly statement replaces 

the detailed listings of reinsurance transactions with a listing of new contracts 

for the period. Various supplemental filings exist for the annual statement, 

which provide more detailed information for particular types of business such 
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as interest sensitive products or accident and health policies. Due to the level 

of detail provided in the supplements, some are considered confidential and 

only available to regulators (e.g., the Risk-based Capital filing and the 

Supplemental Compensation Exhibit).

For groups that are publicly traded, the group files a U.S. GAAP consolidated 

financial statement with the SEC. Pursuant to the U.S. GAAP and SEC 

requirements, these filings provide detailed information enabling readers to 

obtain a view of the group and its operations. Though this does not cover all 

insurance groups in the United States, there is much less need for extensive 

detailed filings for non-publicly traded groups. Consumers primarily need to 

know the status of the legal entity that will be writing their policy, and the 

legal entity filing provides identification of the group. Most U.S. customers 

rely upon a rating from Moody’s or S&P, for example, rather than performing 

their own analysis of the financial position of a legal entity, let alone a group. 

Rating agencies obtain their own information as part of their process. 

Investors in non-publicly traded entities would not need access to all of the 

groups, only the one(s) they were offered to invest in, and the offering would 

include this type of information.

FRB: The FRB requires supervised entities to regularly disclose information 

to the public concerning activities, structure, and ownership. In addition, 

many of the BHCs, SLHCs, and all of the nonbank financial companies

currently subject to FRB supervision are required to make regular filings with 

the SEC that give market participants a clear view of their activities, 

performance, and financial position (e.g., quarterly and annual financial 

statements). These filings are publicly available.

20.1 Insurers disclose, at least annually, appropriately detailed quantitative 

and qualitative information in a way that is accessible to market 

participants on their profile, governance and controls, performance, and 

the risks to which they are subject. In particular, information disclosed 

must be: 

 decision useful to decisions taken by market participants;

 timely so as to be available and up-to-date at the time those decisions 

are made; 

 comprehensive and meaningful;

 reliable as a basis upon which to make decisions; 

 comparable between different insurers operating in the same market; 

and 

 consistent over time so as to enable relevant trends to be discerned.
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20.1 States: Pursuant to the Statements of Statutory Accounting Standards 

(SSAPs) and the Annual/Quarter Financial Statement forms and instructions, 

all legal entity reporting entities provide disclosure information in the 

statutory financial statements in a consistent and comparable manner. In 

addition to various disclosures based on the type of business and activities, all 

entities include disclosures pertaining to risks and uncertainties, certain 

significant estimates, and the vulnerability to concentrations. These

disclosures are taken from the basis of GAAP disclosures, so U.S. GAAP 

filers provide similar information on a consolidated group basis. 

The statutory financial statements are filed electronically in tabular and PDF 

formats with the NAIC for all multi-state insurers. Single state insurers where 

electronic filing would be a burden may be waived from filing electronically 

with the NAIC, but they still file hard copies with the state regulator using the 

NAIC Blank template. The annual statement is required 2 months after year 

end, and the first 3 quarterly statements are due 45 days after the close of the 

quarter. Basic financial information is made available via the NAIC website, 

including some easy to understand graphs, aimed at consumers who typically 

have little financial understanding. However, the full PDF financial 

statements are also available. 

U.S. insurer public filings provide extensive quantitative and qualitative data. 

This data is subjected to an annual audit by an independent CPA. Pursuant to 

the NAIC Annual Financial Reporting Model Regulation, qualifying insurers 

must furnish the Commissioner from their state of domicile with a written 

communication as to unremediated material weaknesses in internal control 

over financial reporting noted during their external audit. Additionally, 

insurance regulators perform a full scope, risk-focused on-site examination at 

least once every 3 to 5 years. The NAIC Accounting Practices and Procedures 

Manual (AP&P) establishes the common baseline for statutory accounting. 

Even though state laws may differ (prescribed accounting practices) and 

permitted accounting practices are occasionally granted to individual insurers, 

material differences to the AP&P capital and surplus and the net income must 

be disclosed in Note 1 of the Notes to Financial Statement. This allows all 

viewers of the legal entity statutory statement to consider the capital and 

operating results on the same exact accounting basis. Accounting 

requirements for a particular item do not change frequently, so consistency 

exists for trending purposes. A five year historical data exhibit is an important 

schedule within the annual statement filing.

The SEC provides electronic access to the GAAP consolidated filings. The 

annual audit report of the independent CPA audit provides assurances on 

whether the financial statements present fairly the financial position, as well 

as whether the company maintained, in all material respects, effective internal 
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controls over financial reporting. While there are some more optionality 

elements in GAAP, the overall basis is comparable from group to group. 

Similar to statutory accounting, GAAP requirements for a particular item do 

not change frequently.

FRB: As noted in response to ICP 20, insurance subsidiaries of entities 

supervised by the FRB and BHCs and SLHCs that are insurance companies 

may be required to periodically disclose quantitative and qualitative 

information pursuant to state law, regulation, or policy. In addition, many of 

the BHCs, SLHCs, and all of the nonbank financial companies currently 

subject to FRB supervision are required to make regular filings with the SEC

that may provide market participants and others with this type of information.

20.2 Disclosure about the financial position of the insurer includes 

appropriately detailed quantitative and qualitative information about the 

determination of technical provisions. Technical provisions are presented 

by appropriate segment. This disclosure includes, where relevant to 

policyholders and market participants, information about the future cash 

flow assumptions, the rationale for the choice of discount rates, and risk 

adjustment methodology where used or other information as appropriate 

to provide a description of the method used to determine technical 

provisions.

20.2 States: Statutory accounting provides more prescriptive requirements for 

reserves, particularly for life products. As such, specific policyholder 

characteristics for life insurance products are considered proprietary data and 

not included in public financial statements. However, the life blocks are 

detailed in an exhibit which identifies the key regulatory requirements 

associated with those policies. Property/casualty companies include Schedule 

P claims development triangles for various categories of products. The Notes 

to Financial Statement contain detail about accounting for major elements of 

the assets and liabilities. The regulatory standards for reserving are available 

to the public to assist in these disclosures. 

GAAP consolidated filings provide more of this type of information since the 

reserve requirements are less prescriptive. The U.S. Financial Accounting 

Standards Board (FASB) recently (June 2014) decided to require for shortduration contracts additional information for incurred and paid claims 

development tables, information on frequency and severity of claims, as well 

as additional disclosures to highlight the effects of discounting and average 

annual pay out of claims. This information, which benchmarks some of the 

existing statutory disclosures, should provide financial statement users 
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improved information on a consolidated basis. 

FRB: Insurance subsidiaries of entities supervised by the FRB and BHCs and 

SLHCs that are insurance companies may be required to periodically disclose 

quantitative and qualitative information pursuant to state law, regulation, or 

policy. In addition, many of the BHCs, SLHCs, and all of the nonbank 

financial companies currently subject to FRB supervision are required to make

regular filings with the SEC that may provide market participants and others 

with this type of information.

20.3 Disclosure about the financial position of the insurer includes 

appropriately detailed quantitative and qualitative information about 

capital adequacy. An insurer discloses information that enables users to 

evaluate the insurer’s objectives, policies and processes for managing 

capital and to assess its capital adequacy. This information encompasses 

the generic solvency requirements of the jurisdiction(s) in which the 

insurer operates and the capital available to cover regulatory capital 

requirements. If an internal model is used to determine capital resources 

and requirements, information about the model must be provided having 

due regard to proprietary or confidential information.

20.3 States: Significant quantitative disclosures allow sophisticated financial 

statement users to garner a lot of information about capital adequacy. The 

legal entity’s Total Adjusted Capital and the Authorized Control Level RBC 

amount are disclosed in the 5-year historical data exhibit. A management’s 

discussion and analysis provides information about trends and changes in the 

operational direction of the company. The detailed information on investment 

portfolio composition and transactions provides insight into the risk appetite 

of the legal entity. More detailed understanding of the insurer’s capital 

management, however, is considered proprietary by U.S. insurers.

GAAP consolidated filings include more discussions in this regard, due to 

their lack of detailed investment disclosure and the nature of representing the 

various legal entities within the group.

FRB: Insurance subsidiaries of entities supervised by the FRB and BHCs and 

SLHCs that are insurance companies may be required to periodically disclose 

quantitative and qualitative information about capital adequacy pursuant to 

state law, regulation, or policy. In addition, many of the BHCs, SLHCs, and 

all of the nonbank financial companies currently subject to FRB supervision 

are required to make regular filings with the SEC that may provide market 

participants and others with this type of information.
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20.4 Disclosure about the financial position of the insurer includes 

appropriately detailed quantitative and qualitative information about 

financial instruments and other investments by class. In addition, 

information disclosed about investments includes:

 investment objectives;

 policies and processes;

 values, assumptions and methods used for general purpose financial 

reporting and solvency purposes, as well as an explanation of 

differences (where applicable); and

 information concerning the level of sensitivity to market variables 

associated with disclosed amounts.

20.4 States: The legal entity statutory annual statement includes detailed listings 

of all investments owned, as well as those acquired and/or disposed of during 

the year. Additional information by asset classes is provided. Detailed 

investment policies and derivative use plans are considered proprietary in the 

United States. However, Notes disclosures are provided for various asset 

classes regarding the accounting bases, risks, and market sensitivities. 

Detailed accounting requirements for valuation are publicly available in the 

statutory accounting literature (similar to GAAP). 

GAAP consolidated financial statements include more of this information 

since there are more varied categories that depend upon insurer classification 

of investments requiring different accounting treatment. 

FRB: Insurance subsidiaries of entities supervised by the FRB and BHCs and 

SLHCs that are insurance companies may be required to periodically disclose 

quantitative and qualitative information about financial instruments and other 

investments pursuant to state law, regulation, or policy. In addition, many of 

the BHCs, SLHCs, and all of the nonbank financial companies currently 

subject to FRB supervision are required to make regular filings with the SEC

that may provide market participants and others with this type of information.

20.5 Disclosure about the financial position of the insurer includes 

appropriately detailed quantitative and qualitative information about 

enterprise risk management (ERM) including asset-liability management 

(ALM) in total and, where appropriate, at a segmented level. At a 

minimum, this information includes the methodology used and the key 

assumptions employed in measuring assets and liabilities for ALM 

purposes and any capital and/or provisions held as a consequence of a 
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mismatch between assets and liabilities.

20.5 States: At the legal entity level, the detail of the company’s results regarding 

ALM is considered proprietary. However, the requirements the company must 

follow are public, based on the state’s adoption of the Standard Valuation Law 

and the Actuarial Opinion and Memorandum Regulation. If the testing results 

in the need for an ALM reserve, it is disclosed in the Liabilities page. The 

details of these items, instead, are included in the annual Regulatory Asset 

Adequacy Issues Summary (RAAIS) filed annually with the regulator and in 

the detailed actuarial memorandum made available to the regulator each year. 

Other considerations of ERM may be included in the Management’s 

Discussion and Analysis, which is a public document. However, again, too 

much detail regarding ERM at a legal entity level is considered proprietary.

In the GAAP consolidated financial statements, the Management’s Discussion 

and Analysis section includes disclosures regarding the ALM results for the 

life insurers as a group. There is a good discussion of risks and management 

of the risks for the group.

FRB: Insurance subsidiaries of entities supervised by the FRB and BHCs and 

SLHCs that are insurance companies may be required to periodically disclose 

quantitative and qualitative information about ERM pursuant to state law, 

regulation, or policy. In addition, many of the BHCs, SLHCs, and all of the 

nonbank financial companies currently subject to FRB supervision are 

required to make regular filings with the SEC that may provide market 

participants and others with this type of information.

20.6 Disclosure includes appropriately detailed quantitative and qualitative 

information on financial performance in total and by segmented financial 

performance. Where relevant, disclosures must include a quantitative 

source of earnings analysis, claims statistics including claims 

development, pricing adequacy, information on returns on investment 

assets and components of such returns.

20.6 States: The legal entity filings include many breakout summaries of 

premiums and claims/losses, as well as disclosure of gains and losses (realized 

and unrealized) and interest/dividends received for specific investment 

classes. However, the investment schedules include this information for each 

individual security. Claims development triangles exist for property/casualty 

business, and underwriting gain/loss is specifically disclosed. 

GAAP consolidated filings include more of these disclosures from the 
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perspective of major business units (whereas the legal entity does it for 

product types only).

FRB: Insurance subsidiaries of entities supervised by the FRB and BHCs and 

SLHCs that are insurance companies may be required to periodically disclose 

quantitative and qualitative information on financial performance in total and 

segmented by financial performance pursuant to state law, regulation, or 

policy. In addition, many of the BHCs, SLHCs, and all of the nonbank 

financial companies currently subject to FRB supervision are required to make 

regular filings with the SEC that may provide market participants and others 

with this type of information.

20.7 Disclosure about the financial position of the insurer includes 

appropriately detailed quantitative and qualitative information on all 

reasonably foreseeable and relevant material insurance risk exposures 

and their management. This disclosure must include information on its 

objectives and policies, models and techniques for managing insurance 

risks (including underwriting processes). At a minimum, disclosures must 

include:

 information about the nature, scale and complexity of risks arising 

from insurance contracts;

 how the insurer uses reinsurance or other forms of risk transfer;

 an understanding of the interaction between capital adequacy and 

risk; and

 a description of risk concentrations.

20.7 States: Potential liabilities that are probable to occur and able to be estimated 

must be booked as liabilities; otherwise, a contingent liability is disclosed in 

the Notes. Reinsurance transactions are listed by entity, including reserve 

ceded, and information about the type of reinsurance. Risk concentrations are 

disclosed in various presentations, particularly for invested assets, but 

including in the Notes.

GAAP consolidated financial statements include more qualitative disclosures 

on these topics since they have less prescribed quantitative schedules.

FRB: Insurance subsidiaries of entities supervised by the FRB and BHCs and 

SLHCs that are insurance companies may be required to periodically disclose 

quantitative and qualitative information on all reasonably foreseeable and 

relevant material insurance risk exposures and their management pursuant to 

state law, regulation, or policy. In addition, many of the BHCs, SLHCs, and 
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all of the nonbank financial companies currently subject to FRB supervision 

are required to make regular filings with the SEC that may provide market 

participants and others with this type of information.

20.8 Disclosure includes appropriately detailed information about the 

company profile, including the nature of its business, a general 

description of its key products, the external environment in which it 

operates and information on the insurer’s objectives and the strategies in 

place to achieve them.

20.8 States: This type of disclosure occurs in the legal entity financial statement, 

but to a lesser extent than the GAAP consolidated statement due to the nature 

of the statements. The quantitative details in the statutory legal entity 

statement provide significant amounts of information regarding life insurance, 

annuity (including a supplement that spells out the various types of annuities), 

and deposit-type contracts (breakouts for GICS, etc.). While the 

management’s discussion and analysis discusses some high level objectives, 

some of this information is considered proprietary.

In the GAAP consolidated statement, this information is more descriptive 

since many legal entities are included and less specific detail exists. 

FRB: Insurance subsidiaries of entities supervised by the FRB and BHCs and 

SLHCs that are insurance companies may be required to periodically disclose 

information about an insurance company’s profile and other information 

pursuant to state law, regulation, or policy. In addition, many of the BHCs, 

SLHCs, and all of the nonbank financial companies currently subject to FRB 

supervision are required to make regular filings with the SEC that may 

provide market participants and others with this type of information.

20.9 Disclosures include the key features of the insurer’s corporate 

governance framework and management controls including how these 

are implemented.

20.9 States: While some corporate governance information exists in the statutory 

financial statement, much of this is considered proprietary in the United States

and thus is only available to the regulators. Additional disclosures regarding 

corporate governance practices are expected to be provided to regulators 

beginning in 2016, but this information will also be considered proprietary 

and subject to confidentiality protections.

FRB: Insurance subsidiaries of entities supervised by the FRB and BHCs and 
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SLHCs that are insurance companies may be required to periodically disclose 

information that includes an insurer’s corporate governance framework 

pursuant to state law, regulation, or policy. In addition, many of the BHCs, 

SLHCs, and all of the nonbank financial companies currently subject to FRB 

supervision are required to make regular filings with the SEC that may 

provide market participants and others with this type of information.

20.10 Subject to the nature, scale and complexity of an insurer, supervisors 

require insurers to produce, at least annually, audited financial 

statements and make them available to market participants.

20.10 States: The NAIC Accreditation program includes a requirement for annual 

audited financial statements, with a size threshold based upon premiums 

written.

FRB: Insurance subsidiaries of entities supervised by the FRB and BHCs and 

SLHCs that are insurance companies may be required to produce audited 

financial statements pursuant to state law, regulation, or policy. In addition, 

many of the BHCs, SLHCs, and all of the nonbank financial companies

currently subject to FRB supervision are required to make regular filings with 

the SEC that may provide market participants and others with this type of 

information.

ICP 21 Countering Fraud in Insurance

21 The supervisor requires that insurers and intermediaries take effective 

measures to deter, prevent, detect, report and remedy fraud in insurance.

21 States: Statutes provide state insurance regulators with means to address 

insurance fraud. State Antifraud Plan laws, regulations and bulletins require 

insurers to establish internal models for fraud prevention and reporting. 

Antifraud Plans detail the measures an insurer should take to prevent fraud 

and provide protocol when fraud is discovered. The insurer or intermediary’s 

Antifraud Plan must be filed with the state insurance regulator.

State regulators conduct financial and market conduct examinations based on 

guidance provided in the NAIC Market Regulation Handbook and the NAIC 

Financial Condition Examiners Handbook. Such examinations are used to 

assess measures insurers have in place to counter fraud as well as to detect 

fraud which may have occurred or is occurring within an insurer. The timing 
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of such examinations is determined by state laws, regulations, and bulletins. 

Some examinations are conducted on a cyclical basis (annual, once every 3-5 

years, etc.), while others are targeted or conducted as warranted by an 

insurer’s consumer complaint trends. Insurers understand that in order to 

continue conducting business in a state, they should demonstrate they are in 

compliance with all state laws, including antifraud laws.

Many U.S. insurers and intermediaries dedicate specific staff to address 

internal and external fraud, commonly known as Special Investigation Units 

(SIUs). State insurance regulators work closely with SIUs to assist in fraud 

investigations, as well as the prevention of fraud.

FRB: The FRB relies on the federal and state supervisors of “functionally 

regulated” subsidiaries of entities supervised by the FRB, such as insurance 

companies and broker-dealers, to examine those subsidiaries and take 

supervisory and other remedial actions when appropriate. The FRB works 

closely with the other regulatory agencies to address supervisory concerns of 

common interest and is authorized by statute to require, through formal 

supervisory action, the holding company or bank to cease and desist from 

violations of law or regulation. Common provisions for formal enforcement 

actions include a requirement that the holding company cure specified 

violations of law.

21.1 Fraud in insurance is addressed by legislation which prescribes adequate 

sanctions for committing such fraud and for prejudicing an investigation 

into fraud.

21.1 States: States utilize the antifraud laws established through their state 

legislature to combat insurance fraud, which may be classified as a 

misdemeanour or felony, depending upon the severity of the fraudulent act. 

An insurer or intermediary may be subject to a monetary penalty, suspension 

of a license, or revocation of a license if it is determined a fraudulent act has 

been committed. 

21.2 The supervisor has a thorough and comprehensive understanding of the 

types of fraud risk to which insurers and intermediaries are exposed. The 

supervisor regularly assesses the potential fraud risks to the insurance 

sector and requires insurers and intermediaries to take effective measures

to address those risks.

21.2 States: State regulators maintain reporting and cooperative relationships with 
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all state and federal law enforcement agencies, SIUs, and independent 

antifraud associations. These relationships allow state regulators to better 

understand and combat insurance fraud and work towards the reduction of 

insurance fraud. Through educational opportunities and outreach, state 

regulators encourage all agencies, organizations and insurers to work 

cooperatively on investigations and suspected fraudulent activities. State 

insurance fraud units may initiate independent inquiries and conduct 

independent investigations when they have cause to believe that a fraudulent 

insurance act may be, is being, or has been committed.

21.3 The supervisor has an effective supervisory framework to monitor and 

enforce compliance by insurers and intermediaries with the requirements 

to counter fraud in insurance.

21.3 States: Insurers are required to report external, internal and claims suspected 

fraud. The NAIC’s Antifraud Plan Guidelines set forth the following 

standards for insurers antifraud plans: (1) an acknowledgement that a special 

investigative unit has established criteria that will be used for the investigation 

of suspected fraud; (2) an acknowledgement that the insurer will record the 

date that any suspected fraudulent activity is deterred; and (3) a written 

description of chart outlining the organizational arrangement of the insurer’s 

antifraud positions responsible for the investigation and reporting of suspected 

fraudulent acts. State insurance regulators regularly conduct examinations 

which include an assessment of compliance with relevant antifraud laws and 

requirements.

Additionally, the NAIC offers consumers and insurers the Online Fraud 

Reporting System (OFRS) in order to facilitate the mandatory reporting of 

suspected fraud. A report made in OFRS against an insurer or intermediary is 

delivered to all states in which the insurer or intermediary does business. 

21.4 The supervisor regularly reviews the effectiveness of the measures 

insurers and intermediaries and the supervisor itself are taking to deter, 

prevent, detect, report and remedy fraud. The supervisor takes any 

necessary action to improve effectiveness.

21.4 States: State regulators maintain reporting and cooperative relationships with 

all state and federal law enforcement agencies, SIUs, and independent 

antifraud associations. These relationships allow state regulators to better 

assess the effectiveness of measures in place to deter, prevent, detect, report,
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and remedy fraud. 

The examination process is used to assess the effectiveness of such measures 

and may require action as necessary. Insurance regulators may levy civil 

penalties or take civil action for unfair trade practices, which in many cases 

encompasses instances of fraud; cases may also be referred for criminal 

prosecution. Statutes provide state insurance regulators with all necessary 

means to address insurance fraud.

21.5 The supervisor has effective mechanisms in place, which enable it to 

cooperate, coordinate and exchange information with other competent 

authorities, such as law enforcement authorities, as well as other 

supervisors concerning the development and implementation of policies 

and activities to deter, prevent, detect, report and remedy fraud in 

insurance.

21.5 States: State regulators maintain excellent reporting and cooperative 

relationships with state and federal law enforcement agencies, SIUs, and 

independent antifraud associations. State regulators have statutory authority 

to share information regarding investigations, actions, and examination results 

with other insurance regulators and law enforcement agencies. State 

insurance departments have established protocol and department personnel 

dedicated to investigating and often prosecuting insurance fraud referrals 

when necessary.

ICP 22 Anti-Money Laundering and Combating the Financing of Terrorism9

22 The supervisor requires insurers and intermediaries to take effective 

measures to combat money laundering and the financing of terrorism. In 

addition, and the supervisor takes effective measures to combat money 

laundering financing of terrorism.

22 FinCEN:10

 In the United States, with respect to AML/CFT matters, federal 

and state authorities have specifically outlined roles. The insurance industry 

 

9 The ICP 22 Anti-Money Laundering and Combating the Financing of Terrorism was revised in 2013 and adopted at the IAIS 

Annual General Meeting in October 2013

10 The response to ICP 22 was provided by FinCEN, another office within Treasury. The upcoming FATF report, which will be 

completed within 18 months of the FSAP, will have more information on FinCEN and the U.S. AML/CFT framework.
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is subject to the relevant AML/CFT provisions of the Currency and Foreign 

Financial Transactions Reporting Act, also known as the Bank Secrecy Act 

(“BSA”), 31 U.S.C. § 5311 et. seq. The BSA was enacted by the U.S. 

Congress in 1970 as a means to fight money laundering but its scope has 

expanded over time to address terrorist financing and other crimes and related 

issues. 

The BSA and its implementing regulations, 31 CFR § 1025.100 et seq.,

require insurance companies that issue or underwrite certain products 

(“covered products”) that present a high degree of risk for money laundering 

or the financing of terrorism or other illicit activity—e.g., permanent life 

insurance policies (other than group policies), annuity contracts (other than 

group contracts), and any other insurance products with cash value or 

investment features—to file suspicious activity reports with the Financial 

Crimes Enforcement Network (“FinCEN”), keep records, and maintain an 

AML program applicable to its covered products. 31 CFR §§ 1025.320, 

1025.400, and 1025.210.

FinCEN is responsible for administering the BSA and AML/CFT activities, 

and supervising for AML/CFT in the insurance sector and other financial 

institutions pursuant to the BSA, 31 U.S.C. § 5311 et. seq., Treasury Order 

180-01 of March 24, 2003. FinCEN has delegated to the Internal Revenue 

Service, Small Business/Self-Employment Division (“IRS SB/SE”)”) civil 

examination authority for the insurance companies that offer covered 

products. 31 CFR § 1010.810(b)(8). FinCEN has retained AML/CFT civil 

enforcement authority over these institutions. 31 CFR § 1010.810(a). In 

addition, FinCEN signs MOUs with state insurance authorities to incorporate 

a review for compliance with FinCEN’s regulations into their financial 

examinations of insurance companies. To date, FinCEN has not received any 

referrals of cases for enforcement action from IRS SB/SE or state insurance 

commissioners. 

States: Most states have legislation and regulations that require insurers with 

“covered products” to file suspicious activity reports with the state, keep 

records, and maintain an AML program applicable to its covered products. 

The NAIC Financial Condition Examiners Handbook indicates that regulators 

conducting exams can notify appropriate federal regulators if an insurer is not 

in compliance with the required practice. State insurance regulators can

confirm insurance carriers AML practices during financial and market conduct 

examinations. Pursuant to any agreements that may be in place between 

FinCEN and state insurance departments, the state insurance departments may

provide FinCEN with annual reports, information regarding its examination 

program that relates to compliance with the BSA, special BSA examination 
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initiatives, and instances in which the insurance department personnel believe 

that there are significant BSA violations or deficiencies. State insurance 

regulators coordinate with FinCEN on corrective actions when appropriate. 

A. Where the insurance supervisor is a designated AML/CFT competent 

authority

A.

22.1 The supervisor has a thorough and comprehensive understanding of the 

ML/FT risks to which insurers and intermediaries are exposed and uses 

available information to assess the ML/FT risks to the insurance sector in 

its jurisdiction on a regular basis.

22.1

22.2 The supervisor: 

 issues to insurers and intermediaries enforceable rules on AML/CFT 

obligations consistent with the FATF Recommendations, for matters 

which are not in law or regulation; 

 establishes guidelines that will assist insurers and intermediaries to 

implement and comply with their respective AML/CFT requirements; and 

 provides insurers and intermediaries with adequate and appropriate 

feedback to promote AML/CFT compliance.

22.2

22.3 The supervisor has an effective supervisory framework to monitor and 

enforce compliance by insurers and intermediaries with AML/CFT 

requirements.

22.3

22.4 The supervisor regularly reviews the effectiveness of the measures that 

insurers and intermediaries and the supervisor itself are taking on 

AML/CFT. The supervisor takes any necessary action to improve 

effectiveness.
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22.4

22.5 The supervisor has effective mechanisms in place which enable it 

cooperate, coordinate and exchange information with other domestic 

authorities, such as the financial intelligence unit, as well as with 

supervisors in other jurisdictions for AML/CFT purposes.

22.5

B. Where the insurance supervisor is not a designated AML/CFT competent 

authority

B.

22.6 The supervisor is aware of and has an understanding of ML/FT risks to 

which insurers and intermediaries are exposed. It liaises with and seeks to 

obtain information from the designated competent authority relating to 

AML/CFT by insurers and insurance intermediaries.

22.6 States: The United States splits the responsibilities of AML and CFT 

between various federal agencies. U.S. state insurance regulators provide 

necessary assistance to federal counterparts in areas that have been designated 

as the primary jurisdiction of the federal government. At a minimum, insurers 

and intermediaries offering life insurance products or other investment related 

insurance must have effective measures to deter, detect, and report money 

laundering and the financing of terrorism consistent with the 

recommendations of the Financial Action Task Force on Money Laundering 

(FATF). 

State and federal laws implement and comply with FATF recommendations. 

Money laundering activities have been criminalized in the United States at 

both the state and federal levels. Businesses and individuals must take certain 

record-keeping measures related to AML activities. Effected organizations 

and individuals have specific reporting duties. 

State regulators determine whether insurers have established an AML program 

that has been approved by senior management and contains the required 

elements. State insurance departments may also look at how the company’s 

compliance function takes account of money laundering risks. If a state 

insurance department determines that a company has not established or is not 
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maintaining an AML program, then they have the authority to refer this 

information to the appropriate federal authorities.

22.7 The supervisor has effective mechanisms in place which enable it to 

cooperate, coordinate and exchange information with other domestic 

authorities, such as the financial intelligence unit, as well as with 

supervisors in other jurisdictions for AML/CFT purposes.

22.7 States: State insurance fraud bureaus work closely with their federal 

governmental counterparts when suspected money laundering activities are 

discovered. Regular financial examinations and market conduct examinations 

may discover money laundering activities. Both state and federal regulators 

have the authority to cooperate and share information relating to AML 

investigations. Both state and federal regulators have the authority through 

appropriate arrangements (such as MOUs) to cooperate and share information 

relating to AML investigations. Additionally, the FinCEN, the National 

Insurance Crime Bureau, and the IRS are working with the NAIC and state 

insurance departments to further share information electronically from a 

variety of database systems. 

State insurance fraud bureaus have access to the Federal Bureau of 

Investigation Law Enforcement On-Line (LEO) website. This website 

contains training information related to a number of topics, including AML. 

Through LEO, the state insurance fraud bureaus facilitate inquiries regarding 

suspicious activities with life insurance policies in death or missing person 

cases.

ICP 23 Group-wide Supervision

23 The supervisor supervises insurers on a legal entity and group-wide basis.

23 States: State insurance law sets forth the powers and practices for supervising 

insurers, which can be best summarized by reviewing the NAICs Financial 

Regulation Standards and Accreditation program. Included is a Part A 

standard related to the Model Holding Company Act, which relates to powers 

over the group, and a Part B standard related to examinations and analysis. 

The Part A standards impose specific requirements on the insurer with respect 

to notice and approval of transactions and relationships with an insurance 

holding company system, and also impose certain requirements on the 

ultimate controlling person with the insurance company system. The Part B 

standards for analysis include the requirement (appropriate depth-item e, 
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number 4) that “the lead state is responsible for developing and documenting 

and analysis of the holding company group and for distributing such an 

analysis to the other domestic state in the group by October 31 each year. The 

non-lead state is responsible for developing and documenting an analysis of 

the impact of the holding company system on the domestic insurer by 

December 31 each year.” The same section of the Part B standards indicates

that checklists are available for states to utilize for the analysis. See pages 

517-527 of the 2014 Financial Analysis Handbook. There are also 

expectations placed on lead states relating to examinations as detailed in the 

NAIC Financial Condition Examiners Handbook. 

All states have enacted a version of an insurance holding company law 

substantially similar to the Model Holding Company Act, which is referenced 

throughout this document. State insurance regulators adopted revisions to this 

model in 2010, giving the state insurance commissioner authority, though not 

the requirement, to obtain consolidated financial reports. The revisions also 

require an enterprise risk report for the full holding company structure, clarify 

regulatory access to holding company information, and enable the regulators 

to more easily participate in supervisory colleges. 38 states have adopted the 

revisions to the Model Holding Company Act.

In addition to the above, the NAIC has also adopted the Risk Management and 

Own Risk and Solvency Assessment (RMORSA) Model Act, which requires 

insurers and insurance groups of a certain size to submit information regarding 

their group risk management framework, risks, and capital management. The 

NAIC is currently in the process of developing regulatory guidance for 

reviewing such information and has also recently hired an Enterprise Risk 

Management Advisor, to assist states in evaluating risk management 

techniques used by insurers, including quantitative techniques and practices, 

so that these can be evaluated and examined by the lead state during the 

review of the ORSA reports by analysts and the ORSA processes by the 

examiner. 

FRB: The FRB is the supervisor for U.S. BHCs—including financial holding 

companies (FHCs)—and for SLHCs and nonbank financial companies. The 

relevant governing statutes are the BHC Act and the Gramm-Leach Bliley Act 

and the Dodd-Frank Act (among others), and the HOLA, which governs 

SLHCs. Regulations implementing those statutes include the Federal 

Reserve’s Regulation Y (12 CFR Part 225) and Regulation LL (12 CFR Part 

238), among others. Consolidated supervision responsibility, particularly 

from the resolution perspective, is also derived from Titles I and II of the 

Dodd-Frank Act.
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23.1 The supervisor, in cooperation with other involved supervisors as 

necessary, identifies the scope of the group to be subject to group-wide 

supervision.

23.1 States: The Model Holding Company Act, which serves as the basis for state 

law in this area, defines the term “control” in such a way that the Act sets 

forth the scope of a group subject to the Act to include the ultimate controlling 

party. Effectively, an insurer, along with any affiliate under common control,

as defined by the law, will comprise an insurance holding company system for 

purposes of the Model Holding Company Act. Consequently, the procedures 

referenced in ICP 23 refer to procedures that would be performed on the 

ultimate controlling party. 

FRB: All BHCs (including FHCs) and SLHCs (collectively referred to as 

holding companies) and nonbank financial companies are subject to 

supervision by the FRB on a consolidated basis. Consolidated supervision 

encompasses the parent company and its subsidiaries, and allows the FRB to 

understand the organization’s structure, strategy, activities, resources, risks, 

and financial and operational resilience. Working with other domestic and 

foreign supervisors and regulators, the FRB seeks to ensure that financial, 

operational, or other deficiencies are addressed before they pose a danger to 

the consolidated organization, its banking offices (as applicable), or the 

broader economy.

For SLHCs that are or control insurance companies and nonbank financial 

companies, additional rule-making and supervisory guidance/procedures are 

under development to provide for full implementation of the consolidated 

supervision programs for these entities.

23.2 The identified group, regarded as an insurance group for the purpose of 

group-wide supervision by insurance supervisors, covers all relevant 

entities. In deciding which entities are relevant, consideration should be 

given to, at least: 

 operating and non-operating holding companies (including 

intermediate holding companies); 

 insurers (including sister or subsidiary insurers); 

 other regulated entities such as banks and/or securities companies; 

 non-regulated entities (including parent companies, their subsidiary 

companies and companies substantially controlled or managed by 

entities within the group); and 

 special purpose entities; 
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taking into account, at a minimum, the following elements related to the 

insurance activities: 

 (direct or indirect) participation, influence and/or other contractual 

obligations; 

 interconnectedness; 

 risk exposure; 

 risk concentration; 

 risk transfer; and/or 

 intra-group transactions and exposures.

23.2 States: The NAIC Financial Analysis Handbook requires in procedure #1 for 

the lead state to evaluate and document an understanding of the holding 

company system (referencing the statutory Schedule Y report and the Form B 

Registration among other things). Procedure 1g specifically requires the 

analyst to “document an understanding of the nature and function of material 

non-insurance legal entities that pose a material risk to the holding company 

system and asks the analyst whether there are material risks presented by these 

non-insurance entities. (Page 525 includes a grid that is suggested as a 

possible document to request the company to complete as a way to help assist 

in obtaining such an understanding). 

As noted previously, the Model Holding Company Act defines “insurance 

holding company system” to include an insurer and any affiliates that are 

under legally-defined control of a common parent, which could be the insurer 

itself.

FRB: All holding companies and nonbank financial companies are subject to 

supervision by the FRB on a consolidated basis. Consolidated supervision 

encompasses the parent company and its subsidiaries and allows the FRB to 

understand the organization’s structure, strategy, activities, resources, risks, 

and financial and operational resilience. Working with other domestic and 

foreign supervisors and regulators, the FRB seeks to ensure that financial, 

operational, or other deficiencies are addressed before they pose a danger to 

the consolidated organization, its banking offices (as applicable), or the 

broader economy.

For SLHCs that are or control insurance companies and nonbank financial 

companies, additional rule-making and supervisory guidance/procedures are 

under development to provide for full implementation of the consolidated 

supervision programs for these entities. 
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23.3 The supervisor does not narrow the identified scope of the group due to 

lack of legal authority and/or supervisory power over particular entities.

23.3 States: The Part B Accreditation standards make no exception for these 

issues and states are expected to complete these procedures for all groups, 

including those where the “group-wide supervisor” is located in another 

country. 

FRB: All holding companies and nonbank financial companies are subject to 

supervision by the FRB on a consolidated basis. Consolidated supervision 

encompasses the parent company and its subsidiaries, and allows the FRB to 

understand the organization’s structure, strategy, activities, resources, risks, 

and financial and operational resilience. Working with other domestic and 

foreign supervisors and regulators, the FRB seeks to ensure that financial, 

operational, or other deficiencies are addressed before they pose a danger to 

the consolidated organization, its banking offices, or the broader economy.

For SLHCs that are or control insurance companies and nonbank financial 

companies, additional rule-making and supervisory guidance/procedures are 

under development to provide for full implementation of the consolidated 

supervision programs for these entities. 

23.4 The scope of the group for the purpose of group-wide supervision is 

flexible in order to take account of any (potential) material and relevant 

changes in or outside of the group, such as those regarding the structure, 

activities or macro-economic environment.

23.4 States: As previously indicated, the Model Holding Company Act defines the 

group to include the ultimate controlling party and all other entities controlled 

by that party, and therefore the state has the authority to protect its 

policyholders from any risk imposed on the insurer regardless of whether the 

other entity is regulated by another regulator. Consequently, holding 

company analysis would be performed on all groups even if another functional 

regulator existed (e.g., the Federal Reserve). However, in such situations, the 

Model Holding Company Analysis procedure #10 suggests coordination with 

such other regulator.

FRB: All holding companies and nonbank financial companies are subject to 

supervision by the FRB on a consolidated basis. Consolidated supervision 

encompasses the parent company and its subsidiaries, and allows the FRB to 

understand the organization’s structure, strategy, activities, resources, risks, 

and financial and operational resilience. Working with other domestic and 
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foreign supervisors and regulators, the FRB seeks to ensure that financial, 

operational, or other deficiencies are addressed before they pose a danger to 

the consolidated organization, its banking offices, or the broader economy.

For SLHCs that are or control insurance companies and nonbank financial 

companies, additional rule-making and supervisory guidance/procedures are 

under development to provide for full implementation of the consolidated 

supervision programs for these entities.

23.5 The supervisor requires insurance group structures to be sufficiently 

transparent so that group-wide supervision will not be hindered.

23.5 States: The NAIC annual statement is a public document. Included within 

that document is the requirement that the insurer identify within Schedule Y 

all entities within the holding company system, thus providing transparency 

into the group structure. Additionally, the Model Holding Company Act 

requires the insurer to submit information concerning, if not seek the prior 

approval of, various business operations and transactions occurring within the 

insurance holding company system to which the insurer belongs and to which 

the insurer is a party. 

FRB: All holding companies and nonbank financial companies are subject to 

supervision by the FRB on a consolidated basis. Consolidated supervision 

encompasses the parent company and its subsidiaries, and allows the FRB to 

understand the organization’s structure, strategy, activities, resources, risks, 

and financial and operational resilience. Working with other domestic and 

foreign supervisors and regulators, the FRB seeks to ensure that financial, 

operational, or other deficiencies are addressed before they pose a danger to 

the consolidated organization, its banking offices, or the broader economy.

23.6 The supervisor establishes an effective and efficient group-wide 

supervision framework.

23.6 States: The NAIC group-wide supervision framework is based upon the 

fundamental concepts in the Model Holding Company Act and its 

requirements. This framework, which requires financial statements of or 

within an insurance holding company system, including all affiliates, forms 

the basis for holding company analysis previously mentioned. As referenced 

on page 525 of the NAIC Financial Analysis Handbook, Section 6 of the 

Model Holding Company Act provides broad authority to examine any 

registered insurer and its affiliates to ascertain the financial condition of the 
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insurer, including the enterprise risk to the insurer. This authority is utilized 

for all groups through the NAIC Financial Examiners Handbook (see section 1 

for discussion of “Coordination of Holding Company Group Exams” for how 

such work is coordinated), which requires the lead state examiner in a 

coordinated group exam to document their assessment of ERM and 

governance at the group level (see section 2 for discussion of the risk focused 

exam process). In 2013, the NAIC Group Solvency Issues (E) Working 

Group adopted proposed revisions to the NAIC Financial Analysis Handbook, 

which are intended to create a more cohesive framework that discusses how 

these aspects work together to form the US group supervision framework. 

This updated section will go into the year-end 2014 NAIC Financial Analysis 

Handbook, and in the meantime can be found at the following URL: 

http://www.naic.org/documents/committees_e_isftf_group_solvency_2014_fi

nancial_analysis_handbook.pdf. State insurance regulators have also 

organized supervisory colleges for every U.S. insurer meeting the current 

definition of an IAIG developed by the IAIS, and participated in numerous 

supervisory colleges hosted by other jurisdictions. 

FRB: All holding companies and nonbank financial companies are subject to 

supervision by the FRB on a consolidated basis. Consolidated supervision 

encompasses the parent company and its subsidiaries, and allows the FRB to 

understand the organization’s structure, strategy, activities, resources, risks, 

and financial and operational resilience. Working with other domestic and 

foreign supervisors and regulators, the FRB seeks to ensure that financial, 

operational, or other deficiencies are addressed before they pose a danger to 

the consolidated organization, its banking offices, or the broader economy.

23.7 At a minimum, the group-wide supervision framework includes, as a 

supplement to legal entity supervision: 

 extension of legal entity requirements, as applicable according to the 

relevant ICPs, on: 

o solvency assessment (group-wide solvency); 

o governance, risk management and internal controls (groupwide governance); 

o market conduct (group-wide market conduct); 

 requirements related to group-wide supervision on: 

o complexity of group structure; 

o cross-border/cross-sectoral issues; 

o interplay with legal entity supervision; 

o non-regulated entities.
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23.7 States: The primary solvency assessment performed on the group is that 

which is outlined in the NAIC Financial Analysis Handbook pages 517-527. 

The primary governance, risk management, and internal controls assessment is 

conducted via the examination (with interim analysis work done through the 

Management Considerations section of the Financial Analysis Handbook 

pages 447-459) as detailed in Exhibit M (Governance) and Phases 1-5 of the 

risk-focused examination process (Risk Assessment & Internal Controls). 

Market conduct is handled more broadly with other areas in a department,

communicating issues to the analyst where such exist. The Accreditation Part 

B requirements include a standard that the department should “provide 

relevant information . . . to the financial analysis staff,” and the guidelines go 

on to indicate that included in such are examples like significant complaint 

data and results of market conduct examinations.

With respect to requirements related to group-wide supervision, page 518 of 

the NAIC Financial Analysis Handbook requires the analyst to identify and 

document any other regulated entities within the holding company system and 

the respective involved supervision, and discusses coordination with such 

regulators. Page 517 requires the analyst to document an understanding of the 

nature and function of material non-insurance legal entities. 

The interplay with legal entity supervision is clear given the different 

procedures for the lead state (pages 518-525) and the non-lead state(s) (pages 

526-527), with the focus on the potential impact of the group on the insurer. 

This is also the basis for the Form F, as described in the Model Holding 

Company Act and its companion regulation. 

FRB: The FRB conducts continuous monitoring activities to understand and 

assess each holding company’s and nonbank financial company’s cross-border 

strategy, trends, and legal entity structure and related governance, risk 

management, and internal controls. For a holding company or nonbank 

financial company with international operations or risks, the firm’s ability to 

assess and oversee its cross-border operations is incorporated into the 

evaluation of key corporate governance functions and primary firm-wide risk 

management and internal control functions, including legal and regulatory risk 

management.

In addition, the FRB reviews materials prepared by host country supervisors, 

including examination reports and assessments, and conducts ongoing 

communications with involved foreign and domestic supervisors regarding 

trends and assessment of cross-border operations. These continuous 

monitoring activities are supplemented, as appropriate, by examination 

activities to understand and assess the holding company’s or nonbank 
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financial company’s cross-border strategy, activities, risks, trends, and legal 

entity structure and related governance, risk management, and internal 

controls.

23.8 The supervisor provides for group-wide supervisory review and reporting 

of an insurance group’s adherence to the group-wide regulatory 

requirements.

23.8 States: The Model Holding Company Act requires financial statements of or 

within an insurance holding company system, including all affiliates, which 

forms the basis for the holding company analysis previously mentioned. In 

addition, Section 6 of the Model Holding Company Act provides broad 

authority to examine any insurer registered and its affiliates to ascertain the 

financial condition of the insurer, including the enterprise risk to the insurer. 

These processes include by their nature, identifying the group risks, and then 

determining if any intervention measures are appropriate for the group or any 

of its legal entities. Collectively, these processes represent the group-wide 

supervisory assessment. 

FRB: The supervisory approach is tailored to the size, complexity, and risks 

of the firm. For the largest BHCs and FBOs and for the nonbank financial 

companies, the FRB uses a range of supervisory activities to maintain a 

comprehensive understanding and assessment of each firm. These include 

coordinated horizontal reviews involving the examination of several 

institutions simultaneously, encompassing firm-specific supervision and the 

development of cross-firm perspectives. Firm-specific examination and 

continuous monitoring activities are undertaken to maintain an understanding 

and assessment across the core areas of supervisory focus for each firm. 

For insurance and commercial SLHCs and nonbank financial companies, 

additional rule-making and supervisory guidance/procedures are under 

development to provide for full implementation of the consolidated 

supervision programs for these entities. 

23.9 The supervisor requires that insurance groups have reporting systems in 

place that adequately meet the supervisory demands.

23.9 States: Section 6 of the Model Holding Company Act provides the 

commissioner with the power to examine any insurer and its affiliates to 

ascertain the financial condition of the insurer, including the enterprise risk to 

the insurer by the ultimate controlling party, or by any entity or combination 
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of entities within the insurance holding company system, or by the insurance 

holding company system on a consolidated basis. The same section gives the 

commissioner the authority to order any insurer to produce relevant 

information, either in the possession or not in the possession of the insurer. In 

the event the insurer cannot obtain the information requested by the 

commissioner, the insurer shall provide the commissioner a detailed 

explanation of the reason that the insurer cannot obtain the information and 

the identity of the holder of information. Whenever it appears to the 

commissioner that the detailed explanation is without merit, the commissioner 

may require, after notice and hearing, the insurer to pay a penalty or may 

suspend or revoke the insurer’s license. The annual holding company 

registration statement shall include, among other items, current information 

about the capital structure, financial condition, ownership and management of 

the insurer and any person controlling the insurer; identity and relationship of 

every member of the insurance holding company system; and financial 

statements “of or within” the insurance holding company system if requested 

(statements filed with SEC are acceptable). The ultimate controlling person 

shall file the enterprise risk report with the lead state commissioner, which 

shall identify the material risks within the holding company system that could 

pose enterprise risk to the insurer. Various transactions involving an insurer 

and any member of its insurance holding company system are subject to prior 

approval as well as standards of fairness and reasonableness. In some cases, 

there may be a financial threshold involved; such transactions include sales, 

purchases, loans, and reinsurance agreements. In other cases, there is no

dollar threshold, thereby requiring prior approval for all management 

agreements, service contracts, tax allocation agreements, guarantees and costsharing arrangements. Dividends and other distributions must be reported to 

the commissioner, with extraordinary dividends subject to prior approval.

FRB: BHCs and SLHCs are required to prepare and file a comprehensive set 

of regulatory reports. Regulatory reporting requirements for nonbank 

financial companies are under development. The two insurance nonbank 

financial companies are publicly traded companies that are required to file 

under appropriate SEC rules.

ICP 24 Macroprudential Surveillance and Insurance Supervision

24 The supervisor identifies, monitors and analyzes market and financial 

developments and other environmental factors that may impact insurers 

and insurance markets and uses this information in the supervision of 

individual insurers. Such tasks should, where appropriate, utilise 
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information from, and insights gained by, other national authorities.

24 FIO: At this time, FIO provides surveillance and monitoring of the insurance 

industry and its regulation, pursuant to its authorities under Title V of the 

Dodd-Frank Act. FIO is authorized “to monitor the extent to which 

traditionally underserved communities and consumers, minorities . . . and lowand moderate-income persons have access to affordable insurance products 

regarding all lines of insurance, except health insurance.” 31 U.S.C. § 

313(c)(1)(B). FIO is also authorized “to monitor all aspects of the insurance 

industry, including identifying issues or gaps in the regulation of insurers that 

could contribute to a systemic crisis in the insurance industry or the United 

States financial system.” 31 U.S.C. § 313(c)(1)(A). FIO also contributes to 

the financial stability of the insurance sector and the U.S. financial system as a 

part of its role serving on and working in support of the FSOC. Relatedly, 

FIO analyzes market and financial information as part of its authority “to 

recommend to the [FSOC] that it designate an insurer, including the affiliates 

of such insurer, as an entity subject to regulation as a nonbank financial 

company supervised by the [FRB] pursuant to title I [of the Dodd-Frank 

Act].” 31 U.S.C. § 313(c)(1)(C). FIO also analyzes market and financial 

information as part of its authority to recommend, along with the FRB and in 

consultation with the FDIC, that the Secretary of the Treasury (in consultation 

with the President) make a systemic risk determination, pursuant to statutorily 

prescribed criteria, to place an insurer or a holding company for which the 

largest U.S. subsidiary is an insurer into receivership. See 12 U.S.C. § 

5383(a)(1)(C). Additionally, FIO contributes to the analysis and identification 

of financial stability matters in connection with its role representing the 

United States in the IAIS, which is committed to global financial stability. 

See 31 U.S.C. § 313(c)(1)(E). FIO’s work with the IAIS includes its role on 

the IAIS’s Financial Stability Committee. Finally, FIO monitors and analyzes 

the insurance sector and tracks developments in the insurance market in order 

to research, write, and publish its annual reports and special reports. See 31 

U.S.C. §§ 313(n)-(p). FIO maintains relationships with authorities from the 

U.S. federal government, the states, and other countries.

FRB: One key feature of the Dodd-Frank Act is its macroprudential 

orientation. To implement the macroprudential approach, the Dodd-Frank Act 

established the FSOC, which is tasked with promoting a more comprehensive 

approach to monitoring and mitigating systemic risk. Nonbank financial 

companies are part of the LISCC portfolio within the FRB’s Division of 

Banking Supervision and Regulation. As such, an insurance company that is a 

nonbank financial company is subject to additional supervisory oversight that 

is conducted with a focus on financial stability. The LISCC is comprised of 

senior officers representing various functions at the FRB and Reserve Banks, 
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bringing interdisciplinary and cross-firm perspective to the supervision of 

large systemically important financial institutions. Day-to-day supervision of 

the LISCC firms is overseen by the LISCC Operating Committee, which is 

composed of senior staff whose primary focus is the supervision of entities in 

the LISCC portfolio.

In the aftermath of the crisis, the FRB established the Office of Financial 

Stability and Research (OFS) to help the FRB more effectively monitor the 

financial system and develop policies for mitigating systemic risks. The 

OFS’s function is to coordinate and analyze information bearing on financial 

stability from a wide range of perspectives and to place the supervision of 

individual institutions within a broader macroeconomic and financial context.

States: States monitor trends in the marketplace and among individual 

insurers, and have mechanisms specifically focused on the sharing of that 

information across state insurance departments. State regulators also rely on 

consultations with other financial regulators in the United States to stay 

current. The NAIC’s Financial Regulatory Services and Capital Markets 

Bureau are specifically charged with monitoring and gathering data on insurer 

activities and giving careful consideration to broader market factors that could 

have an impact on insurers, individually, as a group, or as an industry. 

Relevant data is made readily available through regulator-only technology 

tools. In addition to existing NAIC committees charged with monitoring 

individual issues that may have macro-prudential import, the NAIC also 

formed the Financial Stability Task Force. The mission of the Financial 

Stability Task Force, which reports directly to the Executive Committee of the 

NAIC, is to consider issues concerning domestic or global financial stability 

as they pertain to the role of state insurance regulators. Lessons learned from 

these various discussions, including through supervisory colleges, is shared 

actively through regular meetings and conference calls. In particular, this 

includes the Financial Analysis Working Group and the Chief Financial 

Regulator Forum. State insurance regulators participate in all the relevant 

IAIS Subcommittees including holding significant leadership roles, such as 

the Acting Chair of the IAIS Financial Stability Committee, and the Chair of 

the Macroprudential Policy and Surveillance Subcommittee.

24.1 The supervisor identifies underlying trends within the insurance sector 

by collecting data on, but not limited to, profitability, capital position, 

liabilities, assets and underwriting, to the extent that it has information 

available at the level of legal entities and groups. The supervisor also 

develops and applies appropriate tools that take into account the nature, 

scale and complexity of insurers, as well as non-core activities of 
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insurance groups, to limit significant systemic risk.

24.1 FIO: In conducting the monitoring addressed in the response to ICP 24, FIO 

identifies underlying trends in the insurance sector. With regard to the 

FSOC’s work, FIO and the other members of the FSOC have developed a rule 

and interpretive guidance describing the three-stage process of how the FSOC 

will evaluate a nonbank financial company based upon the standards set forth 

in the Dodd-Frank Act. See 12 CFR Part 1310. In Stage 1, the FSOC applies 

uniform quantitative thresholds to identify nonbank financial companies for 

further evaluation. In Stage 2, the FSOC analyzes the nonbank financial 

companies identified in Stage 1 using a broad range of information available 

to the FSOC primarily through existing public and regulatory sources. In 

Stage 3, the FSOC contacts each nonbank financial company that the FSOC 

believes merits further review to collect information directly from the 

company not otherwise available in the prior stages. Each nonbank financial 

company that is reviewed in Stage 3 is notified that it is under consideration 

and is provided an opportunity to submit written materials related to the 

FSOC’s consideration of the company for a proposed designation. 

FRB: The LISCC Operating Committee is supported by a number of 

multidisciplinary teams, including a risk secretariat composed of risk teams, 

capital and performance secretariat, and a data team. The risk teams develop a 

perspective on risk across the LISCC portfolio and contain a breadth and 

depth of expertise from the Federal Reserve System. 

States: U.S. insurance companies are required to file their quarterly and 

annual financial statements with the NAIC. There is a wealth of granular data 

on the activities of each insurance legal entity stored historically in the 

Financial Data Repository. This can be manipulated and analyzed to track 

trends on issues as they come to light. Given the turmoil of the recent 

financial crisis, resources and tools have been added or enhanced to support 

state insurance regulators in their focus on potential systemic issues. The 

NAIC monitors the capital markets and analyzes insurer exposures across the 

different asset classes and investment practices. Distinctions are noted for 

different insurer types and different sizes of companies, given different 

liability and liquidity needs. It has been noted that this analysis has been 

important in focusing the dialogue with insurers about their risk management 

practices. Risk focused surveillance has taken on increased emphasis with 

additional resources dedicated to group issues and prospective risks.

24.2 The supervisor, in performing market analysis, considers not only past 

developments and the present situation, but also trends, potential risks 
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and plausible unfavourable future scenarios with the objective and 

capacity to take action at an early stage, if required.

24.2 FIO: When engaged in the surveillance and monitoring of the insurance 

sector addressed in ICP 24, FIO considers past and present situations and 

potential future trends and risks. 

FRB: The FRB expects large, complex BHCs to have sufficient capital to 

continue lending to support real economic activity while meeting their 

financial obligations, even under stressful economic conditions. Stress testing 

is one tool that helps bank supervisors measure whether a BHC has enough 

capital to support its operations throughout periods of stress. The FRB 

previously highlighted its use of stress testing as a means to assess a financial 

institution’s capital sufficiency during periods of stress with its 2009 

Supervisory Capital Assessment Program (SCAP) and since 2011 through the 

annual Comprehensive Capital Analysis and Review (CCAR) exercise.11 

The Dodd-Frank Act requires the FRB to conduct an annual stress test of large 

BHCs and all nonbank financial companies designated by the FSOC for 

Federal Reserve supervision. The FRB in the annual stress test is to evaluate 

whether these companies have sufficient capital to absorb losses resulting 

from stressful economic and financial market conditions. The Dodd-Frank 

Act also requires BHCs and other financial companies supervised by the FRB 

to conduct their own stress tests. Together the Dodd-Frank Act supervisory 

stress tests and company-run stress tests are intended to provide company 

management and boards of directors, the public, and supervisors with 

forward-looking information to help gauge the potential effect of stressful 

conditions on capital adequacy of these large banking organizations. 

All nonbank financial companies designated by FSOC will be required to 

conduct their first stress test in the calendar year after the year in which the 

company becomes subject to the FRB’s minimum regulatory capital 

requirements, unless the Board accelerates or extends the compliance date. 

States: In addition to the ongoing attention of financial analysts and 

examiners at state insurance departments, staff at the NAIC monitor company 

 

11 The CCAR is an annual exercise by the Federal Reserve to ensure that institutions have robust, forward-looking capital 

planning processes that account for their unique risks and sufficient capital to continue operations throughout times of economic 

and financial stress. As part of the CCAR, the Federal Reserve evaluates institutions’ capital adequacy, internal capital 

adequacy assessment processes, and their plans to make capital distributions, such as dividend payments or stock repurchases, 

and other actions that affect capital. 
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financial solvency and industry performance. This often identifies macro 

issues that are researched and communicated broadly to state insurance 

regulators. The analysis also extends to industry-wide results for the different 

insurance segments, with the results being communicated through semi-annual 

reports to each state insurance department. Ad hoc queries are also performed 

to identify emerging risks and trends. The NAIC’s Financial Regulatory 

Services group has focused on and worked with state insurance regulators on 

broad issues such as the state of the reinsurance market, reinsurance 

companies, and the impact of alternative capital through insurance linked 

securities. Given some of the experiences related to the financial crisis, the 

group also focused attention on different ways that an insurer’s assets could be 

restricted for more general use. For example, assets can be pledged as 

collateral for different types of transactions. The NAIC’s Capital Markets 

Bureau monitors activity specifically as it may relate to or have an impact on 

the investments or investment practices of insurers. Information is 

communicated both generally and on a confidential basis to state insurance 

regulators. Examples of areas of specific focus since the financial crisis 

include securities lending, various aspects of structured securities, derivatives 

use, reliance on external asset managers, and commercial real estate exposure.

24.3 The supervisor performs both quantitative and qualitative analysis and 

makes use of both public and other sources of information, including 

horizontal reviews of insurers and relevant data aggregation.

24.3 FIO: FIO employs both quantitative and qualitative analysis, using public 

and non-public data, in conducting the oversight functions addressed in FIO’s 

response to ICP 24. 

FRB: Firms within the LISCC portfolio are subject to horizontal reviews. 

States: Supervisors regularly perform quantitative analysis relying on 

guidance in the Financial Analysis and Examiner’s Handbooks to ensure 

consistency in approach across insurers. Qualitative considerations are 

handled on a case-by-case basis, depending on the type and size of insurer, 

and the insurer’s historical experience. Aggregated data as benchmarks are 

provided by the NAIC, using the financial statement data submitted by all 

insurers. This will be enhanced going forward beginning in 2015, as 

requirements have been developed for insurer’s Own Risk and Solvency 

Assessment (ORSA). This will allow regulators to have greater access to 

information from insurers regarding how they manage their most significant 

solvency risks, including identification, monitoring and mitigation. Regulators 

will be able to get an understanding of broader issues impacting the industry 
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through a review and comparison of ORSA reports across different 

companies.

24.4 The supervisor uses market-wide data to analyze and monitor the actual 

or potential impact on the financial stability of insurance markets in 

general and of insurers in particular and takes appropriate action. The 

supervisor also makes sufficiently detailed aggregated market data 

publicly available.

24.4 FIO: As explained in its response to ICP 24, FIO’s authority related to 

financial stability is four-fold. First, FIO has authority to monitor the stability 

of the insurance sector as part of its overall surveillance role. Second, FIO has 

authority to analyze the stability of the insurance sector and the overall U.S. 

financial system through its role serving on and supporting the work of the 

FSOC. Third, FIO has authority to assess the stability of particular insurers in 

determining whether to recommend a firm for designation by the FSOC or for 

the Secretary of the Treasury to make a systemic risk determination as to an 

insurer or a holding company for which the largest U.S. subsidiary is an 

insurer and seek the appointment of a receiver. Fourth, FIO has authority to 

assess financial stability as part of its work with the IAIS, including its role on 

the IAIS’s Financial Stability Committee. In each of these work streams, FIO 

uses aggregated market-wide data to monitor overall financial stability and the 

stability of particular insurers. While some confidential data cannot be shared, 

FIO publishes considerable aggregated data in its statutorily-mandated annual 

reports. 

FRB: In the aftermath of the crisis, the FRB established the Office of 

Financial Stability and Research (OFS) to help the FRB more effectively 

monitor the financial system and develop policies for mitigating systemic 

risks. The OFS’s function is to coordinate and analyse information bearing on 

financial stability from a wide range of perspectives and to place the 

supervision of individual institutions within a broader macroeconomic and 

financial context.

States: With the detailed information received, the NAIC tracks key market 

trends across the entire industry and the different insurer types. Important 

solvency and profitability metrics are shared on a regular basis with the 

Financial Analysis Working Group. Particular attention is paid to nationally 

significant insurers. While individual company information that could be 

deemed confidential is discussed in regulator-to-regulator sessions, broader 

issues are generally brought up during open meetings and conference calls. 

Industry-wide information is made publicly available through a variety of 
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different venues, including Capital Markets Special Reports and publications 

of the Center for Insurance Policy and Research (CIPR). CIPR holds four 

regular conferences annually addressing broad market issues. In 2013, CIPR 

sponsored a summit exploring insurers’ liabilities, health care reform and 

terrorism insurance. More recently in 2014, there was a seminar on cyber 

liability risk. CIPR publishes a quarterly newsletter which provides 

information on regulatory activities, key issues, and trends affecting the 

insurance industry such as life-insurer owned captives and longevity risk. 

CIPR has also published white papers on a variety of topics, including the 

state of the life insurance industry and policy considerations for financing 

home ownership. In addition, CIPR maintains numerous issue briefs on their 

website that explain complex insurance issues and link to relevant NAIC 

activity.

24.5 The supervisor assesses the extent to which macro-economic 

vulnerabilities and financial market risks impinge on prudential 

safeguards or the financial stability of the insurance sector.

24.5 FIO: In its financial stability oversight role, addressed in its responses to ICP 

24 and ICP/Std. 24.4, FIO assesses how macro-economic vulnerabilities and 

financial market risks impact the stability of the insurance sector and 

prudential safeguards. 

FRB: Supervisory oversight considers the effect of an unwind of building 

financial imbalances on the LISCC firms and the contribution that they may 

have to any such imbalances. 

States: As industry-wide issues are identified, the impact of these issues is 

considered in developing enhancements to the U.S. solvency monitoring 

framework. This includes modifications to risk-based capital charges, 

accounting and reporting requirements and recommended exam/analysis 

procedures. The regulatory framework is dynamic, constantly evolving to 

address emerging issues. Additional disclosures are regularly adopted to better 

assess the materiality of exposures to the industry as a whole, different 

segments of the industry, or individual companies. Where the exposure or the 

risk is deemed material, modifications can be made to capital and reserving 

requirements. Also, additional guidance is provided for in the financial 

analysis and examiners handbooks.

24.6 The supervisor has an established process to assess the potential systemic 

importance of insurers, including policies they underwrite and 
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instruments they issue in traditional and non-traditional lines of business.

24.6 FIO: FIO assesses the systemic importance of insurers as part of its 

monitoring authority under 31 U.S.C. § 313(c)(1)(a) and pursuant to its role 

serving on and supporting the work of the FSOC. In doing so, FIO considers 

various aspects of those insurers, including lines of business and underwriting 

practices. Also, FIO assesses insurers’ global systemic importance through its 

work with the IAIS, including its membership on the IAIS Financial Stability 

Committee and in work streams related to the identification of G-SIIs. 

States: The Financial Analysis Working Group has, as part of its charge, the 

responsibility of analyzing nationally significant insurers and groups that 

exhibit characteristics of trending toward or being financially troubled; and 

determining if appropriate action is being taken by the state of domicile. It 

also supports, encourages, promotes, and coordinates multi-state efforts in 

addressing solvency problems, including identifying adverse industry trends. 

Where appropriate, it coordinates and consults other regulatory bodies.

Various committees at the NAIC, such as the Life Insurance and Annuities 

Committee or the Financial Condition Committee have responsibility for 

monitoring broader issues, including the evolution of products, lines of 

business, or investment practices.

24.7 If the supervisor identifies an insurer as systemically important, it 

develops an appropriate supervisory response, which is commensurate 

with the nature and degree of the risk.

24.7 FIO: FIO may recommend that an insurer be designated by the FSOC, 

31 U.S.C. § 313(c)(1)(C), which will formally evaluate whether that insurer 

should be subject to FRB supervision and enhanced prudential standards. 

Additionally, pursuant to its authority under Title II, FIO and the FRB (in 

consultation with the FDIC) may recommend that the Secretary of the 

Treasury (in consultation with the President) make a systemic risk 

determination, pursuant to statutorily prescribed criteria, to place an insurer or 

a holding company for which the largest U.S. subsidiary is an insurer into 

receivership. Finally, pursuant to its authority to monitor the insurance 

industry and its regulation, to the extent that FIO identifies regulatory gaps 

and/or systemic risk, FIO may make recommendations.

FRB: Under section 165 of the Dodd-Frank Act, the Board must establish 

prudential standards for nonbank financial companies designated by the FSOC 
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that are more stringent than standards and requirements applicable to other 

companies that do not present similar risks to U.S. financial stability. Those 

standards must include risk-based and leverage capital requirements, liquidity 

requirements, risk management requirements, resolution plan requirements, 

and concentration limits. In October 2011, the FRB issued a final rule 

imposing resolution plan requirements on nonbank financial companies that 

the FSOC has determined will be supervised by the FRB. In early 2014, the 

Federal Reserve issued a final rule that set forth factors that the FRB would 

consider in adopted prudential standards for nonbank financial companies that 

the FSOC has determined will be supervised by the FRB, including certain 

insurance companies. In connection with the final rule, the FRB indicated 

that, following the designation of a nonbank financial company by the FSOC, 

the FRB would assess the business model, capital structure, and risk profile to 

determine how the enhanced standards should apply, and would tailor 

application of the standards by order or regulation to an individual nonbank 

financial company or category of companies. In addition to the regulatory 

measures described above, the FRB also engages in enhanced supervision and 

oversight of larger institutions, including nonbank financial companies 

supervised by the FRB. See, e.g., Supervision and Regulation Letter 12-17 

(consolidated supervision of large financial institutions), 

http://www.federalreserve.gov/bankinforeg/srletters/sr1217.htm, Supervision 

and Regulation Letter 13-23 (risk transfer transactions),

http://www.federalreserve.gov/bankinforeg/srletters/sr1323.htm. 

States: Activities of insurers or groups of insurers that raise concerns of the 

potential for negative impacts are discussed at various levels within the NAIC 

committee structure so that information can be shared as widely among 

regulators as possible and appropriate action can be taken either at the 

company level or across the regulatory framework. The NAIC structure also 

lends itself to a high degree of peer review. Smaller issues can often be left to 

some increased disclosure and monitoring. Larger issues will lead to an 

increased dialogue among regulators so that appropriate action can be taken. 

That dialogue could result in modifications to the regulatory framework to 

address the specific issue and risk. 

Additionally, a state insurance commissioner representative sits on the FSOC,

and he or his staff participate in FSOC committee and working group 

meetings. Presently, that seat is occupied by Missouri Insurance Director 

John Huff.

While confidentiality rules severely limit the ability to share discussions 

specific to the work of FSOC as it relates to individual insurers, the NAIC 

also participates actively in other aspects, including the Systemic Risk 

Committee. That work has not only led to heightened debate on issues at the 
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NAIC, but has also provided a means for the NAIC to express its views on 

activities that could impact insurers. 

ICP 25 Supervisory Cooperation and Coordination

25 The supervisor cooperates and coordinates with other relevant 

supervisors and authorities subject to confidentiality requirements.

25 States: State insurance regulators believe that increased communication, 

coordination, and cooperation among regulators at supervisory colleges, or 

other international fora, is vital to understanding risk trends that could impact 

domestic insurers and policyholders in an increasingly global insurance 

market.12

State regulators engage in regulatory dialogues with jurisdictions from around 

the world relating to topics of mutual regulatory concern, and many states 

have bilateral agreements in place with jurisdictions from around the world 

relating to the exchange of confidential information. Many states are also 

either signatory authorities or have applied to become signatories of the IAIS 

MMoU (considered the gold standard for information exchange amongst 

international regulators), with many more states considering applying.

State insurance regulators have organized supervisory colleges for every U.S.

insurer meeting the current definition of an IAIG developed by the IAIS, and 

participated in numerous supervisory colleges hosted by other jurisdictions 

subject to the appropriate confidentiality provisions as determined by the 

college.

FIO: As addressed in its response to ICP/Std. 3.3, FIO has entered into a 

variety of information-sharing agreements in the course of carrying out its 

statutory authorities. FIO cooperates and coordinates with authorities from 

around the world in a variety of contexts, including through its work with the 

IAIS and Treasury’s involvement with the FSB, through resolution-related 

projects and work streams, and through various bilateral and multilateral 

relationships and work streams.

FRB: FRB staff consults with FIO on issues related to the FRB’s supervisory 

 

12 While NAIC guidance materials often make reference to a lead state regulator, under state law a lead state regulator for an 

IAIG may perform many of the functions recognized to be performed by a group wide supervisor.
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framework, including insurance capital requirements and stress testing. FRB 

staff also meets regularly with industry representatives and with the NAIC, 

state insurance regulators, and foreign regulators and supervisors, to discuss 

insurance-related issues. Federal Reserve Banks work with state insurance 

regulators in the supervision of firms through discussions and informationsharing on supervisory practices and conduct joint inspections as appropriate.

25.1 The supervisor takes steps to put in place adequate coordination 

arrangements with involved supervisors on cross-border issues on a legal 

entity and a group-wide basis in order to facilitate the comprehensive 

oversight of these legal entities and groups. Insurance supervisors 

cooperate and coordinate with relevant supervisors from other sectors, as 

well as with central banks and government ministries.

25.1 States: In order to ensure that the international developments relating to 

supervisory colleges were incorporated into the state regulatory framework, 

the NAIC included the concept of supervisory colleges into revisions to the 

Model Holding Company Act and the related Regulation. Currently 38 states 

have adopted the revisions to the Model Holding Company Act. U.S. state 

insurance regulators, building on the IAIS Guidance Paper, which the NAIC 

Group Solvency Issues (EX) Working Group of the Solvency Modernization 

Initiative (EX) Task Force endorsed as guidance in November of 2009, 

drafted a Holding Company and Supervisory Colleges Best Practices

document in 2011 that is embedded as an appendix of the 2011 edition of the 

Financial Analysis Handbook, and includes standards for participating in 

international supervisory colleges. This document provides additional 

references on how the key aspects regarding supervisory college participation 

might work within the existing U.S. framework, highlighting that supervisory 

colleges should be used in conjunction with existing risk-focused surveillance 

tools.

Communication and coordination between regulators has always been an 

important component of state based solvency regulation. For instance, 

information-sharing procedures between states are a component of the NAIC 

Financial Regulation Standards and Accreditation Program. While the 

successful operation of supervisory colleges raises unique and significant 

challenges, as regulators around the world must attempt to develop a common 

understanding of the overall group-wide risk profile (despite potentially 

differing languages, regulatory, accounting, legal, and corporate regimes of 

each involved jurisdiction), the overarching goals of an international 

supervisory college are quite similar to the lead state approach that has been 

practiced in the United States for many years for insurance legal entities 
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within the same holding company system. 

State insurance regulators have organized supervisory colleges for every U.S. 

insurer meeting the current definition of an IAIG developed by the IAIS, and 

participated in numerous supervisory colleges hosted by other jurisdictions 

entering into the relevant coordination agreements or terms of reference as 

determined appropriate by the relevant supervisory college in order to 

facilitate the comprehensive oversight of these legal entities and groups. 

State insurance regulators have information-sharing agreements with the FRB, 

the OCC, the FDIC, and regularly share information with federal authorities 

on company specific and market-wide issues. The NAIC has an MOU to 

provide public information to the Treasury Department, including FIO and the 

OFR..

FIO: FIO participates in crisis management groups for G-SIIs, along with 

other federal agencies, state regulators, and supervisors from other countries, 

to plan for cooperative supervision in periods of extreme financial stress. See 

also response to ICP 26. 

FRB: The FRB began to participate in supervisory colleges when we became 

responsible for supervising the firms. The FRB is working with state 

insurance regulators to coordinate, plan and host future activities of the 

colleges. CMGs for GSIIs include the FRB, relevant state insurance 

regulators, and the FIO.

25.2 Coordination agreements include establishing effective procedures for:

 information flows between involved supervisors;

 communication with the head of the group;

 convening periodic meetings of involved supervisors; and

 conduct of a comprehensive assessment of the group.

25.2 States: Given the differing legal frameworks, backgrounds, outlooks, and 

expectations of members of a supervisory college, a terms-of-reference 

document or coordination/cooperation agreement is generally agreed upon by 

the supervisory college members, optimally at one of the earlier meetings. 

This type of document serves as defining the expectations of the members of 

the purpose of the college, can include clarification on group membership 

(e.g., whether there will be a tiered membership), clarity on who is the lead 

supervisor(s) and their respective role and responsibilities, scope of activities, 

agreement on frequency and location of meetings, and whether there will be 
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regional colleges or subgroup. The relevant terms of reference or 

coordination/cooperation agreement for a supervisory college will generally 

include the means by which the regulators will share information with each 

other and communicate with each other. The coordination arrangement may 

also include the processes and procedures by which a comprehensive 

assessment of the group is undertaken.

FIO: See response to ICP 25.0.

25.3 Involved supervisors determine the need for a group-wide supervisor and 

agree on which supervisor will take on that role (including a situation 

where a supervisory college is established).

25.3 States: The NAIC Financial Analysis Handbook discusses the role of the lead 

state and more importantly, the process for determining who the lead state 

should be for a group (general considerations). This is an important concept 

because the NAIC Accreditation Standards place requirements on lead states 

for holding company analysis. Over the years, the states have determined the 

lead state for all NAIC group codes (where one or more U.S. insurer is 

included in the group), and the NAIC maintains a tool in I-SITE that shows 

such information as well as the analysis on each of the domestic insurers in 

the group. In addition to this information, the NAIC Financial Analysis 

Handbook also contains information on supervisory colleges, including a 

section that is currently a best practices document for states to use when 

organizing and running colleges. The guidance is expected to be enhanced 

over time as colleges continue to evolve. Included within that section is the 

discussion that colleges may be appropriate for IAIGs, but that concept is also 

embedded in the Model Holding Company Act, and demonstrated by 

reviewing the states’ use of the I-SITE Supervisory College calendar. 

As aforementioned, the Model Holding Company Act was significantly 

revised in 2010 in response to the financial crisis and, as of this writing,

further revisions are being proposed in light of international developments on 

group supervision. Included in the discussion of further revisions is the 

incorporation of language that would provide states the legal authority to act 

as the group wide supervisor for an IAIG, which has already been adopted by 

Pennsylvania as well as other larger states.

25.4 The designated group-wide supervisor takes responsibility for initiating 

discussions on suitable coordination arrangements, including establishing 

a supervisory college, and acts as the key coordinator or chairman of the 
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supervisory college, where it is established.

25.4 States: The lead state supervisor initiates discussions relating to relevant 

coordination arrangements and establishing a supervisory college, the means 

by which confidential information will be exchanged between the involved 

supervisors, and organizing and chairing a supervisory college. NAIC 

guidelines provide that a lead state supervisor provides consistent 

communication with applicable international regulators, is available to attend 

supervisory colleges, gathers all applicable materials from non-lead states in 

preparing for international meetings and may initiate conference calls with 

non-lead domestic regulators summarizing the supervisory college meeting 

and any effects on domestic companies if such efforts are deemed efficient 

and effective for the particular group by the lead state.

State regulators believe that while the lead state supervisor should initiate 

discussions, there should be two-way communication between the lead state 

and host supervisors (for example, host supervisors should inform the lead 

state supervisors on issues that they would like further information on).

25.5 There is appropriate flexibility in the establishment of a supervisory 

college – both when to establish and the form of its establishment – and 

other coordination mechanisms to reflect their particular role and 

functions.

25.5 States: NAIC guidelines point out the importance of ensuring that regulators 

maintain the appropriate flexibility when organizing supervisory colleges in 

order for the college to appropriately take into consideration the nature, scope,

and activities of the specific group. While best practices are encouraged, the 

objective is to make the college more issue-driven and not necessarily based 

on any fixed form/template.

25.6 The designated group-wide supervisor establishes the key functions of the 

supervisory college and other coordination mechanisms.

25.6 States: The lead state supervisor establishes the key functions of the 

supervisory college after consultation with the other supervisory college 

members and as agreed to in the relevant coordination/cooperation 

arrangements or terms of reference document.
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25.7 The designated group-wide supervisor understands the structure and 

operations of the group. Other involved supervisors understand the 

structure and operations of parts of the group at least to the extent of how 

operations in their jurisdictions could be affected and how operations in 

their jurisdictions may affect the group.

25.7 States: The role of the lead state supervisor is to understand the structure,

operations, and risks inherent to the group and to facilitate this understanding 

for the other members through focused discussions and disclosures at the 

colleges. The lead state supervisor, with the help of involved supervisors and 

of the group, gathers all information necessary to gain a comprehensive 

overview of the group, its entities, and its activities.

25.8 The designated group-wide supervisor takes the appropriate lead in 

carrying out the responsibilities for group-wide supervision. A groupwide supervisor takes into account the assessment made by the legal 

entity supervisors as far as relevant.

25.8 States: A lead state supervisor would ultimately be responsible for ensuring 

effective and efficient group-wide supervision, for which he needs the 

information and cooperation of the supervisory authorities responsible for 

supervision of all of the relevant entities. The lead state supervisor should 

coordinate and disseminate essential information needed for reviewing and 

evaluating risks and assessing solvency on a group-wide basis at the 

supervisory college.

ICP 26 Cross-border Cooperation and Coordination on Crisis Management

26 The supervisor cooperates and coordinates with other relevant 

supervisors and authorities such that a cross-border crisis involving a 

specific insurer can be managed effectively.

26 States: U.S. state insurance regulators have some experience with crossborder crisis management situations, including certain states involvement in 

Crisis Management Groups (CMGs) for certain insurers. Supervisors are able 

to coordinate with other relevant authorities, through supervisory colleges or 

otherwise, such that a cross-border crisis involving a specific insurer can be 

managed effectively. A recent example demonstrated that the lead state of the 

group coordinated not only with other U.S. states, but with material 

international regulators. This cooperation and coordination is made possible 
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through broad-based authority that all states have in their statutes based upon 

the NAIC Model Law on Examinations, which provides states with the ability 

to share, and receive any information with/from international regulators. 

Further, state regulators actively participate in international standard setting at 

the IAIS Resolution Working Group. 

FIO: Pursuant to its statutory authority under Title II and Title V of the 

Dodd-Frank Act, FIO cooperates and coordinates with other authorities on 

matters related to cross-border crises. FIO participates in CMGs, which 

include representatives from federal, state, and foreign authorities. These 

CMGs, which are at an early stage of development, are intended to provide 

authorities with a tool to coordinate actions and plan for any changes to a 

financial institution in the event of a severe economic stress. In addition, FIO 

serves on IAIS and the FSB committees in relation to insurer resolution policy 

matters. Finally, pursuant to its authorities under Title II, FIO works with the 

FDIC and the FRB on matters related to the U.S. government’s orderly 

liquidation authority (i.e., Title II resolution). 

FRB: The FRB hosts supervisory colleges for nonbank financial companies it 

supervises as part of its regular supervisory process. 

Also, under the auspices of the FSB, the FRB hosts CMGs for host 

supervisors of both firms. See Key Attributes of Effective Resolution 

Regimes for Financial Institutions, FSB, October 2011. CMGs generally meet 

in person at least once per year, and via telephone conference as needed. The 

CMG membership includes insurance supervisors from relevant U.S. states 

and foreign jurisdictions where major operations are conducted, as well as 

FIO and the FDIC. Resolution planning and recovery planning are discussed 

at CMGs.

Recovery planning is part of the supervision process for U.S. G-SIIs. The

FRB’s dialogue with the firms is ongoing. 

The FRB has organized sessions with industry experts and the FDIC so that 

various domestic stakeholders in insurance supervision understand the statebased resolution authorities and processes in the United States 

Regarding resolution plans, the FDIC and FRB received the July 2014 filings

of the initial firm-developed resolution plans from nonbank financial 

companies it supervises, as required by Title I of the Dodd-Frank Act.

26.1 The supervisor meets regularly with other relevant supervisors and 

authorities to share and evaluate information relating to specific cross-
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border insurers and to analyze and assess specific issues (including 

whether there are systemic implications) in non-crisis periods.

26.1 States: U.S. state insurance regulators meet with international regulators via 

supervisory colleges on a regular basis to share and evaluate information 

relating to specific cross-border insurers, and to analyse and assess specific 

issues including communicating before and after such meetings. State 

regulators utilize an I-SITE application known as the Supervisory College 

Calendar in order to plan colleges around other colleges already scheduled.

FIO: FIO works with committees within the IAIS and the FSB relating to 

insurer resolution, particularly in the cross-border context. In addition, as 

addressed in its response to ICP 12, FIO works with the FDIC and the FRB in 

non-crisis periods to establish policies and processes that can be utilized in the 

event of resolution of an insurer under Title II of the Dodd-Frank Act. 

Finally, as part of its authority to monitor the insurance industry and through 

its role on the FSOC, FIO meets and works with the FSOC member agencies 

to analyze the systemic implications of insurers on the financial stability of the 

insurance sector and the overall U.S. financial system. As noted above, FIO 

participates in CMGs for insurers that have been designated as G-SIIs. 

FRB: Please see the FRB’s discussion of supervisory colleges and CMGs in 

ICP 26.

26.2 The supervisor develops and maintains plans and tools for dealing with 

insurers in crisis and seeks to remove practical barriers to efficient and 

internationally coordinated resolutions.

26.2 States: U.S. state insurance regulators have been leading or participating in 

all of the major insurer’s international supervisory colleges, and there appear 

to be no barriers to efficient and internationally coordinated work. There is 

one non-U.S. international group that has been experiencing some financial 

difficulty; it is the NAIC’s understanding that the lead state for that group has 

been communicating with the global group-wide supervisor and other 

international regulators in making sure issues are being dealt with 

appropriately.

FIO: Through the activities addressed in ICP/Std. 26.1, FIO develops and 

maintains plans and tools to deal with crisis periods and tries to remove 

barriers to efficient and internationally coordinated resolutions.

FRB: Please see the FRB’s discussion of supervisory colleges and CMGs in 
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ICP 26.

26.3 The group-wide supervisor coordinates crisis management preparations 

with involvement from other relevant supervisors and ensures that all 

supervisors in the relevant jurisdictions (at a minimum those where the 

insurer is of systemic importance) are kept informed of the crisis 

management preparations.

26.3 States: As noted previously, U.S. state insurance regulators have some 

experience with cross-border crisis management situations and may 

coordinate relating to crisis management preparations where relevant and 

inform other relevant supervisors of such preparations. There is one non-U.S. 

international group that has been experiencing some financial difficulty; it is 

the NAIC’s understanding that the lead state for that group has been 

communicating with the global group-wide supervisor and other international 

regulators in making sure the issues are being dealt with appropriately. 

Separately, the overall financial condition of the group has been a point of 

discussion at the NAIC Financial Analysis (E) Working Group, a confidential 

regulator only discussion.

FIO: In engaging in the activities described in ICP/Std. 26.1, where relevant 

and appropriate, FIO coordinates its crisis management preparations and 

informs other relevant authorities of those preparations.

FRB: Please see the FRB’s discussion of supervisory colleges and CMGs in 

ICP 26.

26.4 As far as legal frameworks and confidentiality regimes allow, the 

supervisor shares with other relevant supervisors, at a minimum, 

information on the following: 

 group structure (including legal, financial and operational intragroup 

dependencies); 

 interlinkages between the insurer and the financial system in each 

jurisdiction where it operates; 

 potential impediments to a coordinated solution.

26.4 States: As noted previously, the states have broad authority (see state laws on 

examinations and insurance holding companies) to share and receive any 

information with/from international regulators. This authority, along with 

states’ ability to require submission of group information through the state 
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holding company laws, allows for the sharing of the relevant information with 

international counterparts.

FIO: Title V of the Dodd-Frank Act provides: “In carrying out the functions 

required under [Title V], [FIO] may receive and collect data and information 

on and from the insurance industry and insurers; enter into informationsharing agreements; analyse and disseminate data and information; and issue 

reports regarding all lines of insurance except health insurance.” 31 U.S.C. § 

313(e)(1). As set forth in its response to ICP 3, FIO has entered into 

information-sharing agreements and other cooperation agreements with other 

authorities pursuant to its statutory authority. FIO will continue to develop 

data collection, analysis, and information-sharing arrangements with other 

federal agencies and state regulators. To the extent allowed by its 

information-sharing agreements and federal laws and policies governing the 

use of confidential information, FIO shares information relating to group 

structure, interlinkages between insurers and financial systems, and potential 

impediments to coordinated solutions. 

FRB: As discussed in detail in response to ICP 3, the FRB has in place a 

number of formal and informal agreements for information sharing. FRB staff 

regularly exchanges information with other U.S. federal banking regulators, 

state banking regulators, certain foreign regulators, FIO, state insurance 

regulators, the NAIC, and other federal agencies on issues related to its 

supervision, including group structure, interlinkages, and potential 

impediments to a coordinated solution. 

26.5 The supervisory regime requires that insurers be capable of supplying, in 

a timely fashion, the information required to manage a financial crisis.

26.5 States: As noted previously, U.S. state insurance regulators have some 

experience with cross-border crisis management situations. The states have 

broad-based authority (see NAIC Model Law on Examinations) which 

provides states with the ability for sharing and receiving any information 

with/from international regulators; in the one situation where there has been a 

crisis of a U.S.-based group, information required to manage the situation 

seems to be exchanged with no issues.

In addition, Section 6 of the Model Holding Company Act provides the 

commissioner with the power to examine any insurer and its affiliates to 

ascertain the financial condition of the insurer, including the enterprise risk to 

the insurer by the ultimate controlling party, or by any entity or combination 

of entities within the insurance holding company system, by the insurance 

holding company system on a consolidated basis. The same section gives the 
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commissioner the authority to order any insurer to produce relevant 

information, either in the possession or not in the possession of the insurer. In 

the event the insurer cannot obtain the information requested by the 

commissioner, the insurer shall provide the commissioner a detailed 

explanation of the reason that the insurer cannot obtain the information and 

the identity of the holder of information. Whenever it appears to the 

commissioner that the detailed explanation is without merit, the commissioner 

may require, after notice and hearing, the insurer to pay a penalty or may 

suspend or revoke the insurer’s license.

FIO: As noted in FIO’s response to ICP 12, Title I and Title II of the DoddFrank Act require certain insurers to provide information in times of financial 

distress. Under Title I, insurers designated by the FSOC are subject to 

enhanced prudential standards and consolidated supervision by the FRB, 

which includes a requirement to submit a “plan for rapid and orderly 

resolution in the event of material financial distress or failure.” 12 CFR Part 

243.4. Under Title II, FIO—along with the FRB, the FDIC, the Secretary of 

the Treasury, and the President—may assess insurers facing financial distress 

or failure for systemic risk and, if appropriate, refer those insurers for 

receivership.

FRB: The FRB requires supervised entities to provide information in a timely 

manner, particularly in times of crisis.

26.6 The supervisory regime requires insurers to maintain contingency plans 

and procedures based on their specific risk for use in a going-and goneconcern situation.

26.6 States: Contingency plans are not required of insurers, but some regulators 

have experience working with insurer cross border contingency plans. 

Further, the RBC Model Act gives commissioners the authority to request 

corrective action plans. Additionally the Hazardous Financial Condition 

Model Regulation (#385) gives commissioners a wide variety of actions to 

reduce risk.

FIO: As explained in FIO’s response to ICP 12, Title I of the Dodd-Frank 

Act requires insurers to maintain plans for use in going- and gone- concern 

situations. Further, Title II of the Dodd-Frank Act sets up a process by which 

insurers and holding companies for which the largest U.S. subsidiary is an 

insurer are assessed for systemic risk and, if appropriate, referred for 

receivership.
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FRB: As discussed in ICP 26, in addition to the firm-prepared resolution 

plans, firms engage in recovery planning exercises as part of the supervisory 

process. This enables insurers to think through material and actionable 

options to be invoked in times of severe stress.

26.7 The supervisor informs the group-wide supervisor as soon as it becomes 

aware of an evolving crisis. The group-wide supervisor coordinates such 

that this information and any other relevant information that it has 

become aware of on its own is shared among other relevant supervisors 

and other relevant authorities promptly.

26.7 States: U.S. state regulators have some experience with cross-border crisis 

management situations. In the case of the previously-mentioned U.S.-based 

group, the issue was identified by the U.S. lead state. In the case of the nonU.S. international group, the issue was noted by the U.S. states in their 

ongoing review of the group, and the group-wide supervisor also noted the 

issue. It is the NAIC’s understanding that the lead state for that group has 

been communicating with the global group-wide supervisor and other 

international regulators in making sure the issues are being dealt with 

appropriately.

FIO: FIO works with other authorities in its role as a monitor of the 

insurance industry and as a member of the FSOC, which focuses on assessing 

and addressing risks to financial stability. FIO also analyzes and assesses 

crisis situations under Title II of the Dodd-Frank Act, which provides that the 

Director of FIO and the FRB (in consultation with the FDIC) may recommend 

that the Secretary of the Treasury (in consultation with the President) make a 

systemic risk determination, pursuant to statutorily prescribed criteria, to place 

an insurer or a holding company for which the largest U.S. subsidiary is an 

insurer into receivership. In the event of a crisis, FIO will work with other 

authorities, including the FDIC, the FRB, and state authorities, to assess an 

insurer facing financial distress or failure. Finally, FIO assesses crisis 

situations through its work with the IAIS. 

FRB: As members of the CMG, the FRB would expect any local supervisors 

to inform the group-wide supervisor as soon as an evolving crisis is known.

26.8 Subject to legislative requirements and confidentiality regimes, the 

supervisor shares information with relevant supervisors and authorities 

and in a way that does not compromise the prospects of a successful 

resolution. The supervisor shares information with other relevant 

authorities or networks as well, whenever necessary, and subject to the 
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same legislative and confidentiality requirements.

26.8 States: U.S. state regulators have some experience with cross-border crisis 

management situations. The states have broad authority through their state 

laws (see NAIC model laws on examinations and insurance holding 

companies) to share and receive any information with/from international 

regulators. This authority, along with states’ ability to require submission of 

group information through the state holding company laws, allows for the 

sharing of the relevant information with international counterparts. For 

example, in the example mentioned previously of the one U.S.-based group, in 

which the lead state of the group coordinated other U.S. states and with a 

specific material international regulator, information was successfully shared.

FIO: See response to ICP 3.

FRB: Information-sharing mechanisms are discussed in ICP 3 and ICP/Std.

26.4.

26.9 The group-wide supervisor analyzes and assesses the crisis situation and 

its implications as soon as practicable and supervisors try to reach a 

common understanding of the situation.

26.9 States: Again, U.S. state regulators have some experience with cross-border 

crisis management situations. In both of the two previously-mentioned cases, 

(U.S. based group and non-U.S. based group), the crisis situation and its 

implications were assessed in a timely manner and there was a great deal of 

communication between involved supervisors to reach a common 

understanding.

FIO: See response to ICP/Std. 26.7. 

FRB: Information-sharing mechanisms are discussed in ICP 3 and ICP/Std.

26.4.

26.10 The supervisor cooperates to find internationally coordinated, timely and 

effective solutions.

26.10 States: Again, U.S. state regulators have some experience with cross-border 

crisis management situations. There is significant amount of international 
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supervisory cooperation taking place. For instance, in the two previously 

mentioned cases (U.S. based group and non-U.S. based group), the involved 

supervisors cooperated to find internationally coordinated, timely and 

effective solutions.

FIO: FIO tracks the globalization of the insurance industry and regularly 

cooperates with international authorities to find coordinated, timely, and 

effective solutions. This cooperation occurs in FIO’s work representing the 

United States at the IAIS. FIO’s work with FSOC also involves cooperative 

efforts related to financial stability. Finally, FIO’s role involving orderly 

liquidation authority under Title II could involve cross-border coordination 

and cooperation among relevant authorities. 

FRB: Information-sharing mechanisms are discussed in ICP 3 and ICP/Std.

26.4.

26.11 If a fully coordinated supervisory solution is not possible, the supervisor 

discusses jurisdictional measures with other relevant supervisors as soon 

as possible.

26.11 States: Regulators coordinate with other supervisors where appropriate on a 

timely basis.

FRB: Information-sharing mechanisms are discussed in ICP 3 and ICP/Std.

26.4.

26.12 In a crisis situation, the group-wide supervisor coordinates public 

communication at each stage of the crisis.

26.12 States: Public communication may be provided as appropriate. In the two 

cases described above there was no need for the supervisors to provide a 

public communication. Instead, the group itself provided such 

communication.

FRB: Information-sharing mechanisms are discussed in ICP 3 and ICP/Std. 

26.4.