Report - 2024 01 16 A31644 D264351 Bill Report 6027 Sbr Bfgt Ta 24

Summary

A Senate Bill Report on SB 6027, an act relating to the insurer holding company act, as of January 11, 2024, prepared by non-partisan staff of the Senate Committee on Business, Financial Services, Gaming & Trade. The bill is sponsored by Senators Stanford, Kuderer and Nobles by request of the Insurance Commissioner. The report states that the bill incorporates the 2020 revisions to the NAIC Holding Company Act (#440) and Model Regulation (#450) into Washington State's Insurer Holding Company Act. It describes filing of a Group Capital Calculation and, where scoped, Liquidity Stress Test results with the Office of the Insurance Commissioner, confidentiality of that information, and sharing with designated third-party consultants. The report lists no appropriation and summarizes supporting testimony, including that 27 other states had adopted the measure as of December 2023.

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                            SENATE BILL REPORT
                                  SB 6027

                                      As of January 11, 2024

Title: An act relating to the insurer holding company act.

Brief Description: Concerning the insurance holding company act.

Sponsors: Senators Stanford, Kuderer and Nobles; by request of Insurance Commissioner.

Brief History:
     Committee Activity: Business, Financial Services, Gaming & Trade: 1/11/24.


                                     Brief Summary of Bill
           • Requires insurance holding companies to provide certain information
             regarding solvency at registration.
           • Establishes certain rules and requirements around confidential treatment
             of information regarding solvency.
           • Allows an insurance holding company's solvency information to be
             shared with a designated third-party consultant if certain conditions are
             met.


SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES, GAMING & TRADE

     Staff: Kellee Gunn (786-7429)

     Background: National Association of Insurance Commissioners. The National Association
     of Insurance Commissioners (NAIC) is governed by the chief insurance regulators from the
     50 states, the District of Columbia, and five U.S. territories to coordinate regulation of
     multistate insurers. The NAIC develops legal, financial, and organizational standards for
     insurance regulators through its accreditation process.

     Insurance Holding Companies. An insurance holding company is a system that consists of




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

Senate Bill Report                              -1-                                             SB 6027
     two or more affiliated persons, one of which is an insurer. Every insurer authorized to do
     business in this state that is a member of a holding company system is required to be
     registered with the Office of the Insurance Commissioner (OIC) unless they are subject to
     substantially similar requirements where they are domiciled.

     National Association of Insurance Commissioners Model Acts for Insurance Group
     Supervision. The NAIC’s Insurance Holding Company System Regulatory
     Act—#440—and Insurance Holding Company System Model Regulation with Reporting
     Forms and Instructions—#450—provide state insurance departments with a framework for
     insurance group supervision. The intent of the act is to provide a stronger domestic legal
     structure under which holding companies are supervised.

     Within the last couple of years, NAIC adopted revisions to model acts applicable to
     insurance holding companies. The 2020 revisions create a Group Capital Calculation (GCC)
     and Liquidity Stress Test (LST) to provide U.S. regulators with additional tools for
     conducting group-wide supervision and help understand the financial condition of non-
     insurance entities. The GCC satisfies group capital assessment requirements of the Covered
     Agreements with the EU and UK. LST provides insights into the financial health and risks
     monitored by the U.S. Treasury, and requires insurers to file the results of a specific year’s
     LST to the state insurance commissioner.

     Model Act revisions made in 2020 will become an NAIC accreditation requirement,
     effective January 1, 2026.

     Summary of Bill: The 2020 revisions to the NAIC Holding Company Act—#440—and
     Model Regulation—#450—are incorporated into Washington State's Insurer Holding
     Company Act.

     Tools to Test for Solvency in Insurance Group Supervision. Every insurer authorized to do
     business in this state who is a member of an insurance holding company shall file an annual
     GCC with the OIC at registration, concurrently with other necessary information. If scoped
     by the NAIC's LST framework, LST results may also be required at registration. The report
     of the GCC and LST must be completed in accordance with NAIC's instructions.

     GCC and resulting group capital ratio as well as LST results and supporting disclosures are
     not intended as a means for ranking insurers or insurance holding companies. Publishing, or
     otherwise communicating to the public the results of the GCC or LST is prohibited except
     for in instances to rebut a materially false statement.

     Confidentiality Relating to Information from a Group Capital Calculation and Liquidity
     Stress Test. The OIC shall maintain confidentiality of GCC and the group capital ratio
     produced within an insurance holding company's calculation or the LST and supporting
     disclosures and other information from the insurance holding company.



Senate Bill Report                             -2-                                         SB 6027
     The OIC may share and receive confidential information with third party consultants
     designated by the commissioner provided that the recipient agrees in writing to maintain the
     confidentiality and the privileged status of the information; to ensure the information is not
     stored in a permanent database after the underlying analysis is completed; and consent to
     intervention or notification to an insurer under certain circumstances.

     Appropriation: None.

     Fiscal Note: Not requested.

     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: PRO: These two tools—GCC and LST—are
     important accounting tools for financial examiners to understand the solvency if insurance
     holding companies. NAIC accreditation is important as it brings uniformity—insurance is
     regulated at a state level and not a federal level. If OIC was ever to lose their accreditation,
     OIC would not be able to conduct these registrations with domestic companies, and they
     would need to go elsewhere. Current law focuses mainly on the risks and solvency of
     individual entities, and while state regulators do have the authority to obtain information
     regarding the capital of non-insurance affiliates, they do not all have a consistent framework
     for evaluating such information. The GCC provides key financial information on the
     insurance group, quantifies risk across the group, and aids in understanding whether
     insurance companies may be supporting the operations of non-insurance entities. This
     legislation establishes LST, which is a new tool to help monitor group liquidity risks. As of
     December 2023, 27 other states have adopted this.

     Persons Testifying: PRO: Senator Derek Stanford, Prime Sponsor; Bryon Welch, Office
     of the Insurance Commissioner; Michael Walker, Office of the Insurance Commissioner.

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




Senate Bill Report                              -3-                                          SB 6027


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