State of Wisconsin / OFFICE OF THE COMMISSIONER OF INSURANCE
125 South Webster Street • P.O. Box 7873
Jim Doyle, Governor Madison, Wisconsin 53707-7873
Sean Dilweg, Commissioner Phone: (608) 266-3585 • Fax: (608) 266-9935
E-Mail: ociinformation@wisconsin.gov
Wisconsin.gov Web Address: oci.wi.gov
December 17, 2008
To: Commissioner Thomas Hampton
Members of the Capital and Surplus Relief Working Group
Dear Commissioner Hampton and Working Group Members:
Both the NAIC and individual states have redirected significant resources to
promptly assess and review the ACLI's proposal for Capital and Surplus Relief.
The result of that hard work is the recently issued exposure drafts and grid. I
support the work we have done on this proposal. However, I have concerns
regarding the ability to achieve uniform adoption of the suggested options
within the time frame requested by the industry. As you know, both standard
valuation and statutory accounting provisions are dependent on uniformity in
order to properly function.
First, under the life insurance proposals outlined in the Working Group’s grid,
all but number three (3) require implementation via a rule or statute change or
are related to proposals that require implementation via a rule or statute
change. In order to make these changes effective for year end reporting,
Commissioners will be forced to use extraordinary measures, outside the
normal course of rulemaking or statute implementation. In Wisconsin, for
example, I would need to issue an emergency rule prior to year end. My
legislature is very suspect of the emergency rule process and would be reluctant
to support my action without a clear emergency. I don’t believe that lower
solvency standards for life insurers on an emergency basis during this time of
financial crisis will be well received by my state legislative leaders.
Second, there has been some suggestion that states could implement ACLI’s
requested changes through a permitted practice. This may work in some
situations, but it is important to note permitted practices may be authorized
only where the practice is not contrary to an existing rule.
Additionally, under the Standard Valuation Law, life insurers are required to
meet the minimum reserve requirements in all states where they are licensed.
Consequently, and as noted above, maintaining consistent reporting to all
licensed states, uniform or nearly uniform adoption is critical. We rely on the
statutory financial statement to assess the financial condition of our licensed
December 17, 2008
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insurers. Without consistent reporting, our ability to make those assessments
is severely hampered.
Despite the working group’s efforts to respond to the proposal, one of the most
important questions for the NAIC to consider is the likelihood that all states will
adopt these suggestions. How will either the NAIC or life insurers benefit if
these regulatory changes are not systemically adopted? These revisions to
regulatory capital and accounting requirements are best addressed by calm,
uniform regulatory action to retain the integrity of the regulatory process
applied to these proposals. Market and rating agency perception of regulatory
commitment to capital and accounting integrity is far more important in today’s
environment than haphazard adoption of individual proposals.
I suggest that the working group and NAIC leadership take another look at this
proposal. Where are the true solvency issues? These issues can be resolved by
the state of domicile through standard financial regulatory practice without
the need of emergency rulemaking.
I would be happy to discuss these issues further with you. Thank you.
Sincerely,
Sean Dilweg
Commissioner
cc: Commissioner Roger Sevigny
Commissioner Jane Cline
Commissioner Susan Voss
Commissioner Kevin McCarty