b'TABLE OF CONTENTSNAIC Model Amendments Address Relationships Between Insurers in Receivership and Affiliated Service ProvidersOn August 17, 2021, the NAIC Executive (EX)New Bonding Requirement for Committee and Plenary adopted amendments toAffiliated Service Providersthe Insurance Holding Company Systems Regulatory Act (Model #440) (the Model Act) and theThe biggest changes in the Model Act and Model Insurance Holding Company System ModelRegulation are the adoption of provisions Regulation (Model #450) (the Model Regulation)authorizing an insurance commissioner to require an to address continuity of essential services providedinsurer deemed to be in hazardous financial by affiliates of insurers in receivership and to clarifycondition to obtain a deposit or bond as security ownership of data and other records within theto ensure the provision of services pursuant to its affiliate relationship. contracts with its affiliate providers. The issuance of the deposit or bond, which is at the discretion of Background the commissioner, depends on whether the commissioner determines that concerns exist with The initial efforts to implement these changes beganrespect to the affiliated [partys] ability to fulfill the in 2018, as part of the NAICs Macro Prudentialcontract(s) or agreement(s) if the insurer were to be Initiative. At that time, the NAICs Receivership andput into liquidation. The commissioner is tasked Insolvency (E) Task Force (the Task Force) waswith determining the dollar amount of any deposit expressly tasked with considering gaps in theor bond issued, which shall not exceed the value of relationship between insurers in receivership andthe services provided pursuant to the affiliate their affiliated service-providers. The Task Forceagreement in any one year. A drafting note makes worked quickly and by the 2019 NAIC Summerclear that these changes impact nearly all types of National Meeting had formulated its first set ofaffiliate agreements for services including, but not recommended changes to the Model Act and Modellimited to, agreements for general managerial Regulation. After a few iterations in committee,services, financial and actuarial services, investment following the 2021 NAIC Summer Meeting, the Taskmanagement services, policyholder services, data Forces recommendations were approved and themanagement, etc. revised Model Act and Model Regulation wereIn making a determination as to whether a deposit or adopted. As with all NAIC models, it is up tobond should be required, in addition to the financial individual state legislators and regulators as toposition of the insurer, the commissioner must whether the changes to the NAIC models will beconsider whether the affiliated party is already adopted at the state level.required to post a deposit or bond under state law regulating third-party administrators. In the event the MAYER BROWN |97'