Sep 9

Model Investment Law Redux – The Long Slog Begins


It has begun in earnest.  A reconsideration of the NAIC Model Investment Law.  And, in the current regulatory and financial environment, it is easy to expect over done and/or misguided results ahead.

Here’s the background:

In the mid-1990s, over the course of four to five years, I had the pleasure of being part of the insurance industry’s ‘interested parties’ group that provided input to the NAIC about what should be in a “Model Investment Law.”  Eventually, in 2001, both a defined limits (specific percentage limits by asset class, security, etc.) and a defined standards (basically a ‘prudent person’ approach) version of the law was adopted by the NAIC.

Originally, the Model Investment Law was supposed to become an “accreditation standard”, one of a host of model laws that were required to be passed by a state’s legislature, else the state would not have an NAIC accredited insurance department.  Today, all states and the District of Columbia are accredited, except for New York….but that is a long story.  However, since the Model Investment Law is not an accreditation standard, less than half of the states have adopted the law, while some have adopted only portions of it.

Today, we truly live in a different world than the one that existed in the 1990s, so the NAIC has formed a Working Group to consider material revisions to the Model Investment Law.  By the end of this month, the Group will survey all states on potential changes – some are small and some are rather large.  Of course, the NAIC being the NAIC, this Group is only designed to determine if changes should be considered.  Should the group report that there is support for changes, the NAIC Executive Committee must then decide to form a different Working Group (probably with the same/similar state membership) to actually recommend changes.

Importantly, the existing Working Group is open to meeting (physically or virtually) with industry interested persons in this process.  However, the path is clear.  We can expect material changes in the Model Investment Law…eventually.  And, if some changes are discussed, you can be assured others, currently not under consideration, may be discussed as well.  It will take time, but the regulatory landscape for insurer investments will undergo material change.

If you would like to receive a copy of the upcoming survey questions to be provided to the insurance departments, please click here.