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Property and Casualty Advisory Council

Insurance Regulation Law Update William J. Toman

The business and regulatory environment for insurance companies is constantly changing, and part of our client service involves staying on top of those changes. One way we do this is to attend quarterly meetings of the industry-regulator liaison committees sponsored by the Wisconsin Office of the Commissioner of Insurance ("OCI") for life, health, and property and casualty insurance. This newsletter details the most recent meeting of the Property and Casualty Advisory Council.

Council Chair John Duwell of West Bend Mutual reported that longtime OCI staffers Rhonda and Roger Peterson were retiring. Roger ended his time as director of the financial bureau on July 14, and Rhonda will retire as chief of the P&C section in the market regulation bureau on August 25.

OCI Complaint System Upgrade

OCI IT Director Amit Trivedi reported that OCI is upgrading this outdated system over the next two years. The goals of the upgrade are to allow electronic submission of complaints and responses to reduce the average of 44 days it currently takes to process complaints; to ensure that private information obtained in the process is secure; and to comply with NAIC requirements by the January 2013 deadline.

Assistant Deputy Commissioner Eileen Mallow added that OCI also hopes to improve its ability to analyze and retrieve complaint data, and to improve the process generally (e.g., to continue to reduce the number of complaints by separating out contacts that only seek information as opposed to complaints).

Legislative Update

OCI Legislative Liaison Jim Guidry distributed the accompanying list of bills OCI is following so far this session (with enacted legislation shaded). He highlighted only the following, noting that the budget has occupied everyone, and that the legislature is now out until September 13):

  • Regulatory reform. SB-47, which would give the Small Business Regulatory Review Board authority to determine whether a proposed rule significantly affects small business (and thus must be reviewed by the board), passed the Senate and had a hearing in the Assembly. The bill would affect OCI internal operations.
  • Health care provider liability. OCI is following AB-147/SB-103 because it may affect the Patients Compensation Fund.
  • Prohibition on required auto repair providers. AB-189 was just introduced.
  • Auto insurance changes. OCI has issued a bulletin and updated its publications for this recently enacted legislation.

National Flood Insurance Program

Jim Guidry reported that the House passed the bill discussed at the last meeting, which extends the program for five years, with only a few changes (including a limit on FEMA policies that will prevent it from assuming policies issued by State Farm, which is withdrawing from the market). The bill does not deal with the program's $17 billion debt, most of which arose from Hurricane Katrina. The Senate has a five-week window to act, but many bills have died there. Eileen Mallow noted that there has also been discussion of eliminating subsidies for the program and setting premiums actuarially.

NAIC/Federal Issues

Jim Guidry reported that there are two competing models for implementing federal surplus lines reform: The Nonadmitted Insurance Multi-state Act ("NIMA") created by the NAIC and the Surplus Lines Insurance Multi-state Compliance Compact ("SLIMPact") created by the National Conference of Insurance Legislators ("NCOIL"). The NCOIL version must be passed by nine or ten states before the compact can begin issuing rules and enforcing them, though its commission is meeting today for the first time; SLIMPact allows states to contract without a compact even though that may not be legal. The NAIC version allows states to choose a compact, and needs two states to adopt it before it takes effect. OCI also distributed a state-by-state list of state action. See

Wisconsin probably will not use either approach, and thus will not give or receive allocations of surplus lines premium (though this will not have a big impact because there is not a lot of cross-border coverage here).

Jim Guidry reported that former Illinois Insurance Director Michael McRaith started as director of the Federal Insurance Office, and that the president has appointed former Kentucky Insurance Commissioner Roy Woodall to the Financial Stability Oversight Council ("FSOC"). Eileen Mallow noted that the FSOC is trying to identify nationally significant financial companies, and there may be a couple in Wisconsin (Jim Guidry interjected that the consensus seems to be that property and casualty companies do not fall into this category - AIG notwithstanding). The NAIC's main message for the FSOC is that there is a state regulatory system they need to rely on. OCI has not heard about staffing for the FSOC; the group's duties are mainly data collection and refereeing international disputes.

Finally, Jim Guidry noted that the goal of standardized accounting principles is to incorporate international standards into U.S. financial reporting. He said the SEC's May 26 work plan, a copy of which is available upon request, is readable and discusses one possible method of reaching that goal, that is, having a U.S. board review international standards to endorse, modify or ignore them for the U.S. The SEC is requesting comments. The work plan does not address reconciling statutory accounting principles ("SAP") with generally accepted accounting principles ("GAAP"). Any standardization would affect even private companies if they have an independent audit or contract with the government.

Other Business

In response to a question about possible capital requirements based on enterprise risk management, OCI noted that Peter Medley could address that subject at the next meeting.

For more information on the Insurance Regulation Group, please contact William Toman at (608) 283-2434 / or your Quarles & Brady attorney.