Senate Bill Report SB 6048

Summary

A Senate Bill Report on SB 6048, a bill addressing the group-wide supervision of internationally active insurance groups, as reported by the Senate Committee on Financial Institutions, Economic Development & Trade on January 16, 2020. The majority report recommends that Substitute Senate Bill No. 6048 be substituted and pass. The background describes the National Association of Insurance Commissioners' Holding Company Model Act (#440) and defines an internationally active insurance group, with thresholds of at least $50 billion in assets or $10 billion in gross written premiums. The bill summary states that the Office of the Insurance Commissioner may act as group-wide supervisor or acknowledge another official in that role, and must publish the groups it supervises. The report also summarizes supportive public testimony.

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Full text

                             SENATE BILL REPORT
                                   SB 6048

                                As Reported by Senate Committee On:
             Financial Institutions, Economic Development & Trade, January 16, 2020

Title: An act relating to the group-wide supervision of internationally active insurance groups.

Brief Description: Addressing the group-wide supervision of internationally active insurance
   groups.

Sponsors: Senators Das, Lovelett, Nguyen, Saldaña, Kuderer and Wilson, C.; by request of
   Insurance Commissioner.

Brief History:
   Committee Activity: Financial Institutions, Economic Development & Trade: 1/14/20,
       1/16/20 [DPS].

                             Brief Summary of First Substitute Bill
          Ÿ Grants the Office of the Insurance Commissioner the authority to
            supervise internationally active insurance groups or defer authority to
            another appropriate regulatory official.


SENATE  COMMITTEE                  ON      FINANCIAL          INSTITUTIONS,           ECONOMIC
DEVELOPMENT & TRADE

    Majority Report: That Substitute Senate Bill No. 6048 be substituted therefor, and the
    substitute bill do pass.
       Signed by Senators Mullet, Chair; Hasegawa, Vice Chair; Wilson, L., Ranking Member;
    Braun and Hobbs.

    Staff: Kellee Gunn (786-7429)

    Background: In response to the 2008 financial crisis, the National Association of Insurance
    Commissioners (NAIC) updated the NAIC Holding Company Model Act. The intent of the
    act was to provide a stronger domestic legal structure under which holding companies are
    supervised. An insurance holding company system (IHCS) is a system consisting of two or
    more affiliated persons, one or more of which is an insurer. Washington enacted legislation


––––––––––––––––––––––
    This analysis was prepared by non-partisan legislative staff for the use of legislative
    members in their deliberations. This analysis is not a part of the legislation nor does it
    constitute a statement of legislative intent.

Senate Bill Report                              -1-                                          SB 6048
    in 2015 that incorporated those updates, making changes to the Insurer Holding Company
    Act.

    Soon after adopting the updates to the act in 2010, the NAIC discovered some gaps in legal
    authority and the power of a state supervising internationally active insurance groups
    (IAIGs). An IAIG is an IHCS that has:
        Ÿ premiums written in at least three countries;
        Ÿ at least 10 percent of total gross written premiums written outside the United States;
            and
        Ÿ total assets of the system based on a three-year rolling average that are at least $50
            billion, or total gross written premiums of $10 billion.

    In December 2014, the NAIC adopted additional changes to clarify the legal authority and
    power of a state to act as a group-wide supervisor for IAIGs, as well as the authority for
    domestic regulators to cooperate in requiring certain actions by an IHCS. The new changes
    were put forth as NAIC’s Holding Company Model Act (#440).

    The NAIC is an association composed of elected and appointed insurance regulators from the
    states and territories of the Unites States. The Office of the Insurance Commissioner (OIC)
    is a member of the NAIC.

    Summary of Bill (First Substitute): The provisions of the Insurer Holding Company Act
    are amended to include the NAIC’s Holding Company Model Act (#440), as required for
    accreditation by the NAIC.

    The OIC is authorized to act as a group-wide supervisor. As a group-wide supervisor for
    IAIGs, the OIC must engage in certain supervision activities including assessing the
    enterprise risk of the IAIG. The OIC may acknowledge another regulatory official as the
    group-wide supervisor if there are no substantial insurance operations by the IAIG in
    Washington State or the United States, or it is determined that another group-wide supervisor
    is the appropriate regulatory official.

    If there is a material change in where the IAIG is domiciled, or where the largest share of the
    group's premiums, assets, or liabilities are, the OIC will determine the group-wide supervisor.
    The OIC shall publish the identity of IAIGs that are supervised by the OIC in the Washington
    State Register and on the OIC website.

    An IAIG must be a registered insurer and is liable for, and must pay, reasonable expenses for
    administering their supervision.

    EFFECT OF CHANGES MADE BY FINANCIAL INSTITUTIONS, ECONOMIC
    DEVELOPMENT & TRADE COMMITTEE (First Substitute): A technical change is
    made to allow for the OIC to conduct other group-wide supervision activities, as long as they
    are consistent with the authorities and the model act. The language comes from the NAIC’s
    Holding Company Model Act (#440).

    Appropriation: None.



Senate Bill Report                             -2-                                         SB 6048
    Fiscal Note: Available.

    Creates Committee/Commission/Task Force that includes Legislative members: No.

    Effective Date: Ninety days after adjournment of session in which bill is passed.

    Staff Summary of Public Testimony on Original Bill: The committee recommended a
    different version of the bill than what was heard. PRO: This amends the Holding Company
    Model Act. This will fulfill the NAIC's recommendation. It will allow greater flexibility in
    its role of authorizing a domestic insurer, and its role internationally. In 2015, the Legislature
    passed the Holding Company Act. At the time, NAIC told states without IAIG's they did not
    need to include language regarding supervision of IAIGs in the state's Holding Company Act.
    It is important to know this is an NAIC requirement for accreditation and it is important for
    domestic companies like PEMCO and Regents. There are no IAIGs in this state. I am here
    on behalf of three insurance associations, representing hundreds of companies providing all
    kinds of lines of insurance. One of the principal tenets of insurance is to maintain NAIC
    accreditation. Not adopting this would jeopardize NAIC accreditation.

    Persons Testifying: PRO: Senator Mona Das, Prime Sponsor; Mel Sorensen, American
    Property and Casualty Insurance Association, American Council of Life Insurance, America's
    Health Insurance Plans; Lonnie Johns-Brown, Office of the Insurance Commissioner.

    Persons Signed In To Testify But Not Testifying: No one.




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