Insurance in a Time of Transition: Highlights From the 16th Annual NFI Insurance Public Policy Summit

Biden administration priorities, NAIC direction, diversifying the talent pipeline in the insurance space and the insurance industry’s response to the COVID-19 pandemic were among the issues covered during the 16th annual Networks Financial Institute (NFI) virtual Insurance Public Policy Summit, co-hosted by Faegre Drinker and Indiana State University on April 7, 2021.

The Summit provided a venue for young professionals and students to learn about the pressing public policy issues in the insurance space. Indiana State University President Deborah Curtis highlighted the NFI and its role in financial services and risk management research, education and policy. Participants also heard a discussion between Scott College of Business Dean Terry Daugherty and Senior Gongaware and NFI Scholar Ellei Kay on how the NFI contributed to her academic experience and prepared her for a career as an insurance actuary. The Summit concluded with Executive Director of Government Relations & University Communications Greg Goode discussing the impact of the NFI on the Indiana State student community.

District of Columbia Commissioner Karima Woods Delivers Opening Remarks

In a virtual welcome to D.C., Commissioner of the District of Columbia Department of Insurance, Securities and Banking (DISB) Karima Woods provided a candid overview of DISB’s priorities for 2021:

• Continued commitment to diversity, equity and inclusion through the formation of internal subcommittees and working groups and an external advisory group
• Resiliency efforts, using the newly developed multi-agency resiliency platform to keep residents informed and protected regarding flooding and natural disasters
• Regulatory innovation and the anticipated launch of a regulatory sandbox
• Ongoing learning and growth through academic partnerships

NAIC and federal engagement on international relations, race and insurance and transparency in big data and artificial intelligence

A View from Capitol Hill

Rep. Trey Hollingsworth (R-IN), new member of the House Financial Services Committee’s Subcommittee on Housing, Community Development and Insurance, engaged in a lively Q&A session with Senior Vice President and Head of Government Affairs for Athene Tracey Laws.

In his opening statement, Hollingsworth stressed the importance of preserving the state-based system of insurance regulation. Laws and the congressman talked infrastructure, COVID-19 and flood insurance, to name a few topics:

• Hollingsworth spoke favorably on the use of public-private partnerships to assist in large scale investments and thinks the industry can play a role in how infrastructure is funded.
• As the economy begins to recover, Hollingsworth noted the importance of enabling the insurance industry to “help people catch up” and cautioned against federal regulatory overreach.

The congressman also prognosticated that it’s unlikely the NFIP will receive a long-term extension this year, calling it a geographical issue in Congress (and not a partisan one).

Team USA

National Association of Insurance Commissioners CEO Mike Consedine, and Associate Director, Division of Supervision and Regulation, Board of Governors, Federal Reserve System Tom Sullivan covered a wide range of topics, including the IAIS Insurance Capital Standard (ICS), the impact of the COVID-19 pandemic and the emerging risks of climate change. Faegre Drinker Partner Sara Manske led the dynamic panel discussion.

On the Biden Administration’s impact on international insurance issues:

• Consedine stated that Team USA never disengaged on international insurance issues, and it will continue engaging under the new administration. He also stated that while the IAIS and Team USA previously focused on macroprudential and solvency-related issues, they will shift their focus to emerging risks, such as climate and cybersecurity.
• Sullivan said that there won’t be significant change in the Federal Reserve’s approach under the new administration, as the Federal Reserve’s leadership promotes ongoing engagement on international insurance issues, noting Governor Quarles’ leadership of the Financial Stability Board.

On capital issues:

• Sullivan stated that the Federal Reserve continues to develop its Building Blocks Approach (BBA) but has pivoted to response mode during the pandemic.
• Consedine noted that the NAIC continues to focus on the Group Capital Calculation (GCC), which was finalized earlier this year. Consedine said that the GCC compliments the BBA.

On the ICS road ahead:

• Sullivan stated it is too early to definitively say what the next steps are on the ICS but that it is crucial for regulators to be data-driven. Sullivan also mentioned continuing issues with the ICS’s volatility and procyclicality, and he stressed that any capital structure needs to be appropriate to the U.S. market.
• Consedine provided that the NAIC is not looking to adopt the reference ICS in its current form and instead is focusing on recognition of the Aggregation Methodology and on comparability. Consedine said that the NAIC remains supportive of the IAIS’s efforts.

On climate risk:

• Consedine recognized that climate risk will be a major focus in 2021 and that the NAIC will look to coordinate with government agencies and industry in tackling the issue.
• Sullivan maintained that climate risk does not squarely fall into the Federal Reserve’s dual mandate, but the Federal Reserve has formed a Supervisory Committee on Climate that will be deliberate and data-driven in analyzing the issue.

Spotlight on 2021 NAIC Priorities with NAIC President Altmaier

The virtual environment didn’t stop our NFI Summit tradition of past NAIC presidents interviewing current NAIC presidents! President and CEO of the American College of Financial Services and former NAIC president George Nichols III interviewed new NAIC President and Florida Office of Insurance Commissioner David Altmaier for the Summit’s keynote address. In a candid and warm conversation, Nichols and Altmaier reflected on the last year and spoke about the NAIC’s priorities for this year. Altmaier commented at the outset that while NAIC sets its priorities each year, 2020 was a great example of why it’s important for the NAIC to be nimble. Here are some highlights from the discussion:

On COVID-19:

• Altmaier said an overarching priority of 2021 is COVID-19. At some point, the NAIC will have to pivot from response to analysis, looking back at how the industry responded.
• He noted that overall, the industry has responded well and there will be a few things to keep an eye on going forward. Altmaier listed potential changes to policy forms and how investment portfolios play out in the coming months as examples.

On race and insurance:

• Altmaier reiterated the NAIC’s commitment to racial equity and the work of the Special Committee on Race and Insurance and its workstreams.
• He hinted at the release of the committee’s 2021 charges (which were published for comment not long after the panel) and encouraged stakeholder engagement as the NAIC continues its work on this important topic.

On climate risk and resiliency:

• The work of the NAIC’s executive level task force on climate and resiliency is broad, encompassing disclosure, innovation and technology, and Altmaier said this issue also involves a broader spectrum of stakeholders beyond the insurance community.
• Altmaier stated that if 2020 wasn’t the year of COVID, it would have been the year of natural catastrophe, and the resiliency of our communities is more important than ever as we move forward.

On international engagement:

• Complementing the discussion between Consedine, Sullivan and Manske, Altmaier said that, while consistency between the U.S. and IAIS in how the markets are regulated is great, regulation doesn’t need to be identical. Altmaier said there have been a lot of successful conversations about ensuring flexibility for jurisdictions to implement the regulatory framework best suited for their market.
• Altmaier pointed to the importance of having the group capital calculation (GCC) in place so that as conversations about the ICS continue, the U.S. has a framework that works for our market. He stated that the GCC is a very new feature for our regulatory outline, so there will be some adaptation over the implementation period and the NAIC will monitor and adjust as time goes on.

On infrastructure:

• Altmaier stressed the role of regulators as policyholder protectors during a brief conversation on infrastructure investing. He said the NAIC has been historically hesitant to relax solvency tools to encourage investments in a particular space if that means “lightening up on diversification factors or charges in investments.”
• When asked about investment in marginalized and underserved communities, and if there will be opportunities for insurers to get creative and invest in pilot projects in those areas, Altmaier said he has an open mind. He acknowledged that it would be “game changing” for those communities and he is open to finding ways to allow that to happen as long as regulators feel comfortable in their ability to safeguard solvency.

On federal activity:

• Nichols asked if there were priorities from the Biden administration that could become NAIC priorities. Altmaier said the NAIC is prepared for that possibility, but the fundamental priority is ensuring the NAIC is demonstrating and communicating the effectiveness of the state-based system.

Altmaier said the NAIC will be sure to demonstrate progress in conversations related to big data, artificial intelligence, consumer privacy and developments in the health care space.

COVID-19 and the Insurance Impact

The COVID-19 pandemic presented challenges and opportunities for the insurance industry, and representatives from life insurance and property and casualty insurance companies shared their perspectives and lessons learned so far. Faegre Drinker Partner Sulema Medrano Novak facilitated an engaging discussion among Allstate Senior Vice President and Deputy General Counsel David Nadig, Allianz Senior Vice President and General Counsel Gretchen Cepek and Pacific Life Senior Vice President of Government Relations Jenn Webb. Panelists identified several areas where the industry appears aligned as a whole:

• Panelists agreed that the pandemic has changed the way industry interacts with regulators, making it more difficult to make connections, but on the other hand it is sometimes easier to get a meeting scheduled. To that end, the virtual environment makes it easier for companies to get the most appropriate team member in the meetings with the regulators.
• The panelists spoke to a slowed exchange of information between regulators/legislators and the industry, and a resulting lack of transparency at times.
• Regarding modernization efforts, the group is hopeful remote notarization, online producer renewals and the ability to send documents digitally would be made permanent.

As the industry continues its work digitally, the use of accelerated underwriting and advances in technology were identified as important considerations as companies evaluate how to provide access to more people.

Partnering in Diversity, Equity and Inclusion

Faegre Drinker Chief Diversity Officer Maria L.H. Lewis, spoke with Equitable Chief Legal Officer José Ramón González, American Council of Life Insurers Vice President of Compliance and Regulatory Affairs Olivia Gillis and Indiana State University Career Services Director Tradara McLaurine about the ways educators and the insurance industry can work together to foster diversity, equity and inclusion (DEI).

Where we’ve been and where we’re going. The panelists acknowledged that the insurance industry has traditionally struggled with diversity, but that there are positive signs on the horizon. McLaurine stressed that the best way to grow the pipeline of talent from underrepresented communities is to ensure students understand the value and importance of insurance products. González stated that it is essential to consider diverse pools of candidates for positions within companies.

Partnerships. Gillis discussed the various organizations that ACLI has partnered with to promote DEI initiatives, including the National Association of Insurance and Financial Advisors’ efforts to promote financial awareness in underserved areas and Everfi’s work in promoting diversity and inclusion training.

Retention. The panelists agreed that companies need to sponsor and mentor young candidates from marginalized communities to foster growth and retention. Lewis noted that employers should look beyond gender and ethnicity, focusing also on generational diversity to ensure a workplace is truly inclusive.