Model Law Development Process

Question 1

Where can the IDEA come from

Answer 1

Can come from several ways

 Regulators
 Industry looking for guidance
 Consumers or their representatives see a need for protection
 Request from federal government or federal agency
 Request form a state or zone when looking for a national solution

As it gathers momentum, 2 outcomes:
 Becomes apparent that further action is needed, OR
 It is found that there is no national interest, or no benefit gained by a national effort, and the idea is shelved until it becomes significant

Question 2

Approving the IDEA

Answer 2

Executive committee will meet at the NAIC quarterly meetings and in the interim as necessary in order to consider request to develop a new model law
 Upon approval of committee, they will present then
□ NAIC executive committee will determine if a proposed new model law or amendment meets the two-prong test
1. The issue that is subject of the model awl necessitates a minimum national standard and or requires uniformity amongst the states, and
2. NAIC members are committed to devoting significant regulator and association resources to educate, communicate and support a model that has been adopted by the membership

If issue does not meet, it may be developed as best practice guideline; If approved, NAIC follows procedures below

Question 3

Drafting the Model

Answer 3

Develop model law within one year of approval; must be ready for action and have to provide quarterly reports on how it is going

 Model laws are used when the draft is presented as a possible law to be used by all members

 Model regulations are used when the idea is not a standalone idea, but rather a supportive concept to a model law that has already been adopted

 Model guidelines are used when idea is of national significance, but not all state insurance agencies regulate the product or the practice; it could be very helpful to states who do license adjusters to provide uniform standards

Question 4

Vetting and Voting

Answer 4

Working group will have several meetings and open conference calls where drafts or edits are presented and discussed and have open comment period
 One there is a general consensus about the language, and they are sur ethe idea is in final draft form, they vote on this form
□ If task force approves then committee then pushes it forward

Question 5

Adoption of the Model Law

Answer 5

○ Model law shall only be presented to the NAIC for consideration if a mi mum 2/3 majority of the responsible parent committee has voted to adopt the model law

 2/3 majority vote of NAIC executive plenaries in favor of adoption is required with each member required to vote based on whether they will make efforts to have the model law introduced

Question 6

Implementation of the Model Law

Answer 6

○ Will be a priority of the NAIC to adopt model law in a majority of states within 3 years after rats’ adoption by the NAIC membership

Question 7

Model Laws

Answer 7

○ Basic building blocks for sound insurance regulation
○ Contain provisions that produce effective regulations for many states on a particular topic

Question 8

Uniform Enactment

Answer 8

○ Does not have to adopt word-for-word the law
○ Uniformity achieved through state’s adoption of language and provisions that are similar to what is contained in the NAIC model law

Question 9

Regulatory Best Practices

Answer 9

○ Do not require uniform adoption or the level of dedicated resources to implement as a model law

○ Includes
 Handbooks
 Guidelines
 White papers
 Bulletins

Question 10

2-Pronged Test for Model Law Implementation

Answer 10

1. The issue necessitates a minimum national standard and/or requires uniformity amongst all states
2. NAIC members are committed to devoting significant regulator and association resources to educate, communicate, and support a model adopted by membership

Question 11

Purpose of Accreditation

Answer 11

For state insurance departments to meet minimum, baseline standards of solvency regulation-especially with respect to multi-state insurers

Emphasize
 Adequate solvency laws
 Effective and efficient financial analysis and examination processes based on priority
 Cooperation and sharing with other states, federal, or foreign regulatory officials
 Timely and effective action for financially troubled or potentially troubled companies
 Appropriate organizational and personnel practices
 Effective processes for company licensing and reviewing changes in control

Review
 Adoption of Model Laws (uniformity)
 Full On-site accreditation reviews every 5 years
 Interim annual reviews