Bill Analysis — PCS to Senate Bill 299, NCDOI NAIC Accreditation (May 4, 2021)

Summary

Analysis of the PCS to Senate Bill 299, NCDOI NAIC Accreditation, for the Senate Commerce and Insurance committee, dated May 4, 2021. It states the bill would enact changes to North Carolina's insurance laws so the North Carolina Department of Insurance (DOI) can maintain its NAIC accreditation, including codifying provisions of a Covered Agreement concerning reinsurance collateral and local presence and establishing national standards governing reserves relating to life insurance policies. Both NAIC provisions must be adopted no later than September 1, 2022. Part I revises Chapter 58 on credit for reinsurance, and Part II creates a new section in Chapter 58 on life insurance reserve financing. The act becomes effective September 1, 2021.

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“Bill Analysis — PCS to Senate Bill 299, NCDOI NAIC Accreditation (May 4, 2021).” Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2021-05-06-s299-smbh-25-csbh-12-v1-ec1c9d443a/, SHA-256 834aef0509fdd7d9e35ad5c234614ad8d8f5f6ebbb0cb0964a0842fe55eaa09d.

Full text

SENATE BILL 299:
NCDOI NAIC Accreditation.
2021-2022 General Assembly
Committee: Senate Commerce and Insurance. If favorable, Date: May 4, 2021
re-refer to Rules and Operations of the Senate
Introduced by: Sens. Sawyer, Johnson Prepared by: Jeremy Ray*
Analysis of: PCS to First Edition Staff Attorney
S299-CSBH-12

OVERVIEW: Senate Bill 299 would enact legislative changes to North Carolina's insurance laws to
comply with the National Association of Insurance Commissioners' model laws (NAIC) and allow the
North Carolina Department of Insurance (DOI) to maintain its NAIC accreditation.
Specifically, Senate Bill 299 would 1) codify provisions from an agreement between the United States,
the European Union (EU), and the United Kingdom (UK) ("Covered Agreement") concerning the
amount of required reinsurance collateral and local presence that reinsurers must maintain to do
business in the other location and 2) establish national standards governing reserves relating to life
insurance policies.
Both NAIC provisions must be adopted no later than September 1, 2022 for North Carolina to remain
in compliance with NAIC accreditation standards.
The Proposed Committee Substitute makes conforming and technical changes.
BACKGROUND: The National Association of Insurance Commissioners is the U.S. 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. The formal certification program began in
June 1990. North Carolina has been accredited since 1991. All fifty states, the District of Columbia,
and Puerto Rico are currently accredited.
CURRENT LAW: Chapter 58 of the General Statutes governs North Carolina's insurance laws.
Currently, the provisions in Chapter 58 meet NAIC requirements.
BILL ANALYSIS:
Part I adds revisions made to the NAIC's "Credit for Reinsurance Model Law and Credit for Reinsurance
Model Regulation" into Chapter 58. If adopted, within five years, the need for reinsurance collateral and
local presence will be eliminated for the U.S., EU, and UK. North Carolina must enact these provisions
by September 1, 2022 to avoid federal preemption.
Section 1 would:
• Make technical corrections.
• Amend the annual information filing requirements for certified reinsurers.
• Amend the factors that the Commissioner of Insurance may consider in evaluating and assigning
a rating to a certified reinsurer.

Legislative Analysis
Jeffrey Hudson
Division
Director S299-SMBH-25(CSBH-12)-v-1 919-733-2578
This bill analysis was prepared by the nonpartisan legislative staff for the use of legislators in their deliberations and does not constitute an official statement of legislative intent.
Senate PCS 299
Page 2

• Add "Reciprocal jurisdiction" as a type of credit for reinsurance that a domestic ceding insurer will
be allowed when certain requirements are met.
• Define terms in the new legislation.
Part II creates a new section in Chapter 58 incorporating language from the NAIC's "Term and Universal
Life Insurance Reserve Financing Model Regulation."
Section 2 would:
• Set requirements for the types and amounts of assets that can be used to secure reserve financing
arrangements for life insurance policies and establish consistent methods to calculate the reserves.
• Defines terms in the new legislation.
• Identify situations exempt from the new regulations.
• List requirements for when covered policies may obtain credit for reinsurance.
• Require annual and quarterly reports of primary security and other security funds.
• Provide a severability clause.
• Explicitly prohibit an insurer from avoiding the requirements of the new regulations.
EFFECTIVE DATE: This act becomes effective September 1, 2021, and applies to all covered policies
entered into, amended, or renewed on or after that date.

*Kristen Harris, Staff Attorney with the Legislative Analysis Division, substantially contributed to this summary.

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