Huff's Opening Remarks

The following are NAIC President and Missouri Insurance Director John M. Huff's Opening Session prepared remarks:

Florida is not a bad place to be in December. And Floridians understand the importance of insurance. Policyholders in this state – and especially those in South Florida are no strangers to disaster. Four of the 10 most expensive natural disasters in U.S. history have happened here in Florida – Hurricanes Andrew, Charley, Ivan and Wilma. They collectively resulted in nearly 44 billion dollars in damages. Recent news reports reinforce the importance of our work as our regulatory colleagues address wildfires in Tennessee, a tornado in Alabama and earthquakes in Oklahoma.

Dramatic scenes like these underscore our responsibilities as regulators. We also know we can depend on our colleagues from other states to help should the need arise. That's just one of the many strengths of our national network.

Your participation in NAIC meetings is essential to shaping policies and consumer protection measures. As I mentioned earlier, this is my last meeting as a member of the NAIC, as well as my last meeting as its president. So I'm doubly nostalgic as I reflect over my service to both Missouri and the NAIC. I stress the word service because much of what we do here is really a labor of love. Those of us around the table truly believe in the good work we can accomplish working together in the best interest of the American public and domestic insurance markets.

It has been said the only thing constant is change. That is certainly true at the NAIC. Our system is designed to respond to shifting dynamics, priorities and technology in the marketplace. That's why we're 145 years strong.

Next January we will again see a peaceful transition of leadership in this country –in the presidency and in state houses across the nation. We'll also see changes at this table and in our organization. If Ted Nickel takes all of my advice, we should be on track for a successful leadership transition into 2017.

While it's a time for change, the NAIC is always ready to adapt because there will still be so many members—and strong state department and NAIC professional staff—who stand prepared to deliver continuity in service. While the average commissioner term is just over four and a half years.

New ideas balanced with institutional knowledge and technical expertise is part of what makes the NAIC such a successful time-tested forum for effective regulation.

2017 Challenges

Our success is certainly not because we always agree. I would argue that it's our differences, and the deliberative process of resolving those differences and finding common ground that make us strong.

We challenge each other, we fight for the ideas and concepts we know work for our states and we compromise for the greater good when necessary. With significant change in Washington, it can be tempting to ride the political winds and gravitate toward our own political viewpoint. If I have learned anything in my time with this organization, however, it's that the role of being a regulator, protecting consumers and providing a strong and stable market must come before any partisan instincts. I have confidence the members here and the members who succeed us, will continue in that spirit. It has been the root of our collective success since 1871.

Health Reform

Looking forward, there are many challenges that will put this body to the test. We survived and are stronger for the work we did to implement the Affordable Care Act over the past six years. None of it was easy, much of it wasn't pretty, and there is no doubt the new administration and the next Congress will modify the policies of the work we've done. They will ask even more of this body in the coming years. Regardless of the process or policy change, I'm convinced the NAIC stands ready to provide whatever technical support and guidance is needed.

Flood Insurance

A less controversial, but no less important priority for next year is our work on flood insurance. Floods are the most common natural disaster in the U.S. All 50 states have experienced flooding in the past five years. That is why it is critical that affordable flood insurance is available to protect homes, businesses and personal property.

In addition to removing barriers to the development of a private flood insurance marketplace to give consumers more choices, we need to work with Congress and the administration to reauthorize and improve the National Flood Insurance Program, which is set to expire in less than a year.


Our challenges for 2017 aren't just domestic. On the international front, state regulators and the NAIC continue to demonstrate world-class leadership in promoting best practices for insurance oversight, providing technical assistance for emerging markets and focusing attention on consumer protection.

Working with the International Association

of Insurance Supervisors, we continue to push strongly for recognition of our strong regulatory structure and the effective results we consistently achieve.

However, the international standard-setting process remains a challenge and now more than ever we need to continue to stand against overly prescriptive, one-size-fits-all solutions that are complex and costly for both business and consumers and potentially damaging to U.S. insurers. We must also continue to build on the bilateral and multilateral relationships, which are the foundation of global group supervision.

Recent Developments in Europe

We continue to have serious concerns with developments and regulatory stability in Europe, and in particular the implementation of its new solvency regime. Some jurisdictions in the European Union have used the new system to effectively put certain U.S. insurers and reinsurers at a competitive disadvantage by discriminating against U.S. insurers and reinsurers. We will continue to assess this process as well as review our own qualified jurisdiction designation process to ensure we are meeting the goals and expectations of a level playing field for U.S. companies and consumers.

We also remain concerned by the covered agreement process. Despite the fact that potential federal pre-emption is not necessary for Europe to recognize the strengths of our system, Treasury and USTR continue to negotiate behind closed doors in secret, potentially making concessions that could harm U.S. policyholders during the 11th hour of this administration. Make no mistake, any regulatory loopholes created by a covered agreement will be addressed by state insurance regulators. Consumer protection is guaranteed by Dodd-Frank and it will continue to be delivered by state insurance commissioners and the NAIC.

Senior Issues/Retirement Security

Here at home, we're facing issues related to an aging population and the related impacts to insurance products. From stresses in the long-term care insurance market to suitability in annuity sales, the NAIC is actively engaged to protect consumers.

We do this while supporting market innovations that will provide new and needed insurance products that are actuarially sound and sold appropriately. A majority of people in this country do not save for their retirement. It is insurance and, therefore, insurance regulation, that plays a critical role.

Long-Term Care

We are working to address issues in legacy long-term care insurance products. That includes revising NAIC models as necessary, reviewing analytics and regulation on rate increases and working to develop new standards for reserves.

We are also continually working with our partners at the state guarantee funds to assess possible funding structure in the event of a company insolvency. As you know, part of the foundation of our state-based system is the backstop provided by state guaranty funds.

When needed, these funds help cover an insured's financial obligation to policyholders, annuitants, beneficiaries, and third party claimants. Together, the authorities granted to insurance regulators under state receivership laws and the guaranty fund backstop protect policyholders in the event of a company insolvency and provide the framework for a company to be resolved in an orderly manner.

Our innovations subgroup has been meeting regularly this year to discuss different approaches to financing long-term care expenses and the role the private market can play to shore up the needs of our seniors. In 2017 we anticipate evaluating various policy options for states and Congress to consider.

Suitability & Senior-Specific Designations

Of course, our responsibility to seniors goes beyond long-term care. Regardless of the outcome of the Department of Labor's fiduciary rule, state insurance regulators have an obligation to protect consumers at the state level and I urge nationwide adoption of the NAIC's Annuity Suitability model.

In addition to suitability standards, the NAIC is reviewing the Annuity Disclosure Model Act to take into account product innovations in the marketplace. We are also reviewing the use of Senior-Specific Certifications and Professional Designations in the Sale of Life Insurance and Annuities as well as the Producer and Insurer Bulletin and Consumer Alert. We will also be looking at the Life Insurance Buyer's Guide to see if updates are needed.

Life Insurance Locator

One of the year's most significant achievements, and one I'm very proud of, is the NAIC's new Life Insurance Policy Locator. This tool provides a one-stop search engine for consumers to gain nationwide access for assistance with finding life insurance policies and annuities.

I congratulate everyone that helped make this project a reality, as it represents collaboration among regulators, the NAIC and our industry partners to bring it all together. The project serves as an example of how the NAIC can help states and insurance companies implement national solutions that are efficient for all. In just a few weeks, more than three thousand consumers have made data requests from the new the Life Insurance Policy Locator now available to 325 million Americans.

2016 Highlights

Is insurance regulation perfect? Of course not, but we are in a good place. We continually made improvements and innovations. Let's go over some of the highlights from this year.


Individually, and collectively we have taken a number of steps to enhance data security expectations across the insurance sector. Over the past year, the NAIC has adopted Principles for Effective Cybersecurity, a Roadmap for Consumer Cybersecurity Protections, updated guidance for examiners regarding IT systems and protocols, and we are currently working on drafting a new Insurance Data Security Model Law.

In addition, we saw growth in the cyber insurance market in 2016, and demand is growing. Cybersecurity risk remains difficult for insurance underwriters to quantify due to a lack of actuarial data. That's why the NAIC developed a new mandatory data supplement. The first data collection occurred in April this year for 2015 data. In August, the NAIC released a report on the initial results from the cybersecurity supplement. We believe information like this from the NAIC is important in order to make advances in this emerging market.

Principles-Based Reserving (PBR)

This year, we met the threshold to kickoff Principles-Based Reserving, and conducted two pilot projects, one of which was designed to test and evaluate the PBR regulatory processes to determine if any changes need to be made to the regulatory processes, Valuation Manual requirements or other annual statement reporting requirements. Eleven companies domiciled in seven states participated in the pilot. The NAIC is currently compiling observations and findings  some of which will be shared during the PBR Implementation task force meeting on Monday morning. The other pilot project involved the NAIC collecting experience data, which will allow the NAIC to develop the necessary systems and applications to serve as a statistical reporting agent for state insurance departments.

Finally, we have also completed negotiations with Actuarial Compass to make web-based training modules for PBR available at no charge to state insurance regulators. Don't worry, anyone else who wants the training can get it, but you will have to pay.

International Successes

Despite some of the challenges I laid out earlier on the international front, there are a lot of good stories to tell from 2016. During our international forum, Federal Reserve Governor Daniel Tarullo made it clear that the U.S.—at both state and federal levels—would pursue regulatory approaches to capital that make sense to OUR market, despite international differences. Good luck topping that next year, Ted.

The NAIC has also strengthened our bilateral and regional relationships with a number of meetings, trainings and dialogues. Since we last met in August, the NAIC has sent delegations to France, Switzerland, England, Germany, Paraguay, Bermuda, Costa Rica, Brazil, China, and Canada for various meetings. We also welcomed 18 international regulators from eight countries to participate in our International Fellows program this year in our Spring and Fall sessions.

While these trips and exchanges are a lot of work to prepare for and execute, we gain value and international goodwill from the exchange of ideas and regulatory training opportunities.

NAIC Budget

Another accomplishment this year was a shift in our budget process to a new more equitable formula for database filing fees. Frankly, the tiered structure methodology currently used is outdated. Going forward, about 70 percent of insurance companies will pay either the same or less under the new formulaic approach. The key drivers to making this change were to simplify the fee structure and reduce the inequality between companies of different sizes.

The Executive Committee approved the release of the proposed NAIC 2017 budget and a Public Hearing was held on December fifth. The proposed 2017 budget essentially maintains a tight control on expenses in line with the 2016 budget and demonstrates the NAIC's focus on improving efficiency and integrating systems into the NAIC's infrastructure

 We look forward to passing the 2017 operating budget on Tuesday.

Consumer Outreach

It's also been a great year for consumer outreach. Our partnership with legendary entertainer Rita Moreno promoting financial literacy has been fun and very productive. Many of you had a chance to meet Rita when she attended the Summer National Meeting in San Diego. Her PSA is currently airing in 48 states and the District of Columbia in English and Spanish. The PSA has aired nearly 33 thousand times, generating 263 million impressions since May.

Our other celebrity partner, Breaking Bad star R.J. Mitte is still bringing in strong results with our millennial outreach. This social media campaign has generated more than 28 million impressions this year.

Teachers across the country are also starting to use materials developed by the NAIC to help students learn about insurance as part of a broader financial literacy curriculum. NAIC staff attended the 2016 Jump$tart National Educator Conference where teachers received Insurance 101 for Teen Drivers – an interactive education module that helps students understand the importance of insurance. If you haven't done so already, I encourage you to share with teachers and education groups in your state. My own daughter, Ann, turned 16 years old this year, and like many Americans with a young driver, this increased my interest in private passenger auto insurance.

Insurance Summit

Also in 2016, the NAIC hosted the inaugural Insurance Summit in Kansas City. The summit efficiently combined several NAIC annual meetings and trainings together into one large conference. It gave more than 800 insurance regulators, industry professionals and consumer representatives the ability to attend a variety of sessions – from market regulation and data to communications and technology. Save the date on your calendars for the week of May 22 next year for this exceptional education and training opportunity.

CIPR Event

Speaking of education efforts, the Center for Insurance Policy and Research – our own CIPR – is hosting a forum here on Monday to dig into some of the challenges regulators face when it comes to innovation in the insurance industry. We'll take a look at the "sandbox" design used by technology startups to test new innovations. Most interesting to me will be exploring avenues for start-ups and regulators to play together in these sandboxes to avoid regulatory challenges later in the design process. If you come to that meeting, please don't bring your pails and shovels. It's not that kind of sandbox.


As everyone can see, together we have accomplished so much this past year. I'm so grateful for the support of everyone who makes the work we do together possible.





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