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Financial Examinations and Market Regulation

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Presentation on theme: "Financial Examinations and Market Regulation"— Presentation transcript:


2 Financial Examinations and Market Regulation

3 Presenters Ignatius Wheeler, CFE Chief Examiner Financial Examinations
David Moskowitz, CFE Assistant Chief Examiner – Market Conduct Steve Carter, CFE, AIE, FLMI, AIRC Senior Examiner Royston Lanning, CPA, CFE Market Analyst

4 Topics of Discussion Overview of Financial Program
Organizational Structure Examinations Examination Key Processes Coordination with Other States Risk Focused Examinations Texas Policies and Procedures Manual Examination Tools Market Regulation Market Conduct Examinations Market Conduct Surveillance Act Market Analysis NAIC Support Q & A

5 Overview of Financial Program
Serves as the primary solvency guardian for policyholders Seeks to detect financial concerns early and take prompt action by applying available statutes, rules and procedures to prevent insolvency and consumer problems Priorities focus on “firm, fair, effective, and efficient” regulation for all insurance entities, while reducing impediments to competition

6 Organization Charts – Financial Program
Danny Saenz, CFE Senior Associate Commissioner Financial Program Godwin Ohaechesi CFE Director - Company Licensing & Registration Mike Boerner ASA, MAAA Managing Actuary Doug Slape CFE, CISA Chief Financial Analyst Ignatius Wheeler Chief Examiner Angel Garrett CPA, CFE Director - Rehabilitation and Liquidation Oversight

7 Organization Charts – Examinations
David Moskowitz CFE Assistant Chief Examiner Market Conduct Linda Peters, CFE Assistant Chief Examiner AES Zeke Ramirez, CFE, CPA Financial - Central Eric Reiner, CPA, CFE Financial - South Gigi Paul, CPA, CFE Acting Assistant Chief Examiner Financial - North Jamie Walker, CFE Examination Reports Ignatius Wheeler Chief Examiner

8 Assistant Chief Examiner
Organization Charts – Market Conduct David Moskowitz, CFE Assistant Chief Examiner Market Conduct Steve Carter, CFE, AIE, FLMI, AIRC Senior Market Conduct Examiner John Sedgwick, CPA, CIE, AFE Market Conduct Examiner - Austin Royston Lanning, CPA, CFE Market Analyst John Lim, CPA, CIE Market Conduct Examiner - Houston Jacqueline Butler, AIE Market Conduct Examiner - San Antonio Shemeddra Thomas, CIE Market Conduct Examiner - Dallas Laura Yanez Market Conduct Examiner - San Antonio Karen Wright, CIE Market Conduct Examiner - Austin

9 Examinations

10 Examination Key Processes
On-site examinations of the books, records, and operations of insurance companies and other entities Financial examinations Market conduct examinations Analysis of annual operations reports filed by premium finance companies Third Party Administrators (TPA’s)

11 Examination Key Processes continued
Target examinations “as needed” in response to potential regulatory concerns Other entities subject to examination include: Guaranty Fund Associations Premium Finance Companies Reinsurance Intermediaries Managing General Agents

12 Examinations – Number of Exams
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year

13 Coordination with Other States
Lead State Allocation of work-load Clear understanding regarding each state’s role and needs Sharing of work papers and findings Characteristics of Lead States State with the largest number of domestic insurance companies in the group State with large or largest premium volume or exposure Domiciliary state of top-tiered insurance company

14 Risk Focused Examinations
January 19, 2010 – Memo sent to all domestic insurers regarding risk focused examination approach Provides clearer methodology for assessing residual risk Allows the assessment of risk management processes other than those that result in financial statement line item verifications

15 Texas Policies and Procedures Manual
Procedures and regulations unique to Texas Texas statutes and rules take precedence

16 Examination Tools TeamMate ACL Software Premium/Loss database requests
Independent testing and sample selection TeamMate Electronic work papers Enhance regulatory insurance examinations Central repository for standard examination procedures Work papers can be shared/assessed NAIC Citrix Server for Lead State Examinations

17 Market Regulation

18 Examinations – Types of Entities
Insurance Companies Premium Finance Companies Agents Third Party Administrators (TPA’s)

19 Examinations – Number of Exams
Fiscal Year 2010 (estimate) – 18 to 20 Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year

20 Examinations – Triggers
Market Analysis Financial Examinations Referrals From Other Divisions Consumer Protection Agents Licensing Life/Health Commissioner Current Events

21 Examinations – Issues Stranger Owned Life Insurance (STOLI) Policies
Premium Financing Race-Based Pricing Clean Claims Long Term Care

22 Market Conduct Surveillance Act
Texas Insurance Code – Chapter 751 Framework for market conduct actions Market Analysis Market Conduct Actions State Coordination Impact on Examinations Authority to schedule a triennial exam for domestic insurers regardless of cause Authority to target problem areas of ALL insurers FOR cause regardless of where they are domiciled.

23 Market Conduct Surveillance Act (continued)
Examination Timelines Must provide 60 days notice (unless extraordinary) Pre-exam conference 30 days prior Draft report due 60 days after exit conference Insurer’s written comments due 30 days after Draft Final report due 30 days after written comments Insurer has 30 days to accept or request hearing NO MORE 1ST OR 2ND LEVEL INTERNAL APPEALS

24 Market Analysis Market Analysis is designed to: Provide tools for each state to review its entire market Identify companies operating in each state’s market that are potentially harming consumers Assist in narrowing the scope of any regulatory action that a state determines it must use

25 Market Analysis (continued)
Steps in Market Analysis include: Baseline Analysis Level 1 Analysis Level 2 Analysis Continuum of Regulatory Responses

26 Market Analysis (continued)
Baseline Analysis A systematic process by which basic parameters are used to evaluate the entire marketplace in order to identify those companies that require more detailed and thorough analysis Baseline Analysis Tools include: Market Analysis Company Prioritization Tool (MAPT) PCCI Justified Complaint Index Companies ranked by score comprised of: MAPT Score PCCI Score Market Share Position

27 Market Analysis (continued)
Level 1 Analysis Market Analysis Review System Areas of Review Include: Management and Operations Financial Performance Measures Complaints Regulatory Actions Examinations Recommended Next Step Level 2 Analysis is scheduled We will proceed within the Continuum of regulatory response No further analysis is necessary

28 Market Analysis (continued)
Level 2 Analysis Core Areas of Review: Consumer Complaints Continuum Activity Examinations Interdepartmental Communications Market Analysis Regulatory Actions Optional Areas of Review Recommended Next Step We will proceed within the Continuum of regulatory response No further analysis is necessary

29 Market Analysis (continued)
Continuum of Regulatory Responses Includes: Office–based information gathering Targeted information gathering Correspondence with company Interrogatories Desk audit Company self-audit Targeted examination Comprehensive Examination Enforcement action

30 Market Analysis (continued)
Lines of Business Credit Life Group Accident & Health Group Life & Annuities Individual Accident & Health Individual Life & Annuities Long Term Care Medicare Supplement

31 Market Analysis (continued)
TDI Market Analysis Activity 40 to 50 Level 1 Analyses performed each of the past two years On target to complete 50 + Level 1 Analyses in the current year 62% of current year Level 1 Analyses have resulted in recommendation of Level 2 Analysis or Continuum response

32 NAIC Support Examination Oversight Task Force
Financial Condition Examiners Handbook Financial Condition (E) Committee Market Regulation Handbook Market Analysis Working Group (MAWG) Market Analysis Review System (MARS) Market Analysis Prioritization Tool (MAPT) Market Initiative Tracking System (MITS) Market Regulation Bulletin Board


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