March 29, 2023

US NAIC Spring 2023 National Meeting Highlights: Joint Meeting of the Financial Stability (E) Task Force and the Macroprudential (E) Working Group


On March 22, 2023, a joint meeting of the Financial Stability (E) Task Force and the Macroprudential (E) Working Group (together the “Joint Group”) took place at the Spring 2023 US National Meeting of the National Association of Insurance Commissioners (“NAIC”). The Joint Group considered several topics and heard updates from its various working groups—below are highlights from the meeting.

  • Macroprudential (E) Working Group (“MWG”)

The MWG provided updates on the following three initiatives:

1. Counterparty Risk Review

The MWG is reinvigorating its efforts to identify and aggregate interconnected exposures faced by the insurance sector, in order to provide regulators with a helpful tool to identify any potential concerns arising from other sectors. As part of these efforts, the MWG is assessing existing reporting structures with an eye towards recommending revisions which would close disclosure gaps. The MWG is also currently considering if the information included in the investment schedules of required NAIC filings could help identify counterparty exposure risk.

2. Liquidity Stress Testing

In connection with the Liquidity Stress Testing Framework (“LST”), which was adopted in 2022, the NAIC has been working with lead state regulators to follow up with LST-eligible insurers to assess the impact to their liquidity from recent interest rate increases. In January 2023, such insurers were asked to complete a back-testing questionnaire which appeared to show that (a) actual assets sales at the end of 2022 matched June 2022 LST submissions, and (b) while increased interest rates led to decrease in value and unrealized losses in bond portfolios held by LST-eligible insurers, such changes did not materially adversely impact such insurers. The MWG further reported that the NAIC has finalized and posted the 2022 LST results to its website.

3. Considerations for Private Equity-Owned Insurers

The MWG provided a status update on how the the 13 Regulatory Considerations applicable to private equity-owned insurers and other insurers are being addressed, noting that Considerations 9, 10 and 11 remained with other organs of the NAIC.1 With respect to Consideration 13 (Offshore/Complex Reinsurance), the MWG presented a worksheet that it had developed to serve as a tool for regulators to assess cross-border reinsurance treaties between affiliates. This worksheet was exposed for a 30-day comment period and also referred to the Reinsurance (E) Task Force.

  • Valuation Analysis (E) Working Group (the “VAWG”)

The Joint Group received a memo from the VAWG discussing whether current Economic Scenario Generators (“ESGs”) adequately consider very low or negative interest rate environments (and whether this raises a material risk at the macroprudential level in the US, particularly for variable annuities). The memo sets out two means of addressing this concern:

1. In the long-term, a new ESG is currently being developed with finalization and implementation to take place over the next few years.

2. A stress test was conducted for 24 insurers, with respect to 2021 (the “2021 VA Stress Test”), to assess the impact of a continuation of persistently low interest rates on variable annuity reserves and risk-based capital (“RBC”). Results from the 2021 VA Stress Test were compared against the baseline of actual December 31, 2021 reported reserves and RBC, finding that for the 24 insurers combined:

a) pre-reinsurance ceded guaranteed benefit reserves increased by $1.8 billion (6 percent) from $30.0 billion to $31.8 billion; and

b) RBC increased by $1.5 billion (24 percent) from $6.4 billion to $7.9 billion.

In its review of the 2021 VA Stress Test, the VAWG found that many companies had taken action to address the risk of prolonged low interest rates in 2021, as well as in prior years. Many companies are also considering potential future actions for the near term. These are similar to past actions, such as performing testing and additional analysis, implementing product changes or adjusting hedging.

  • International Update

During the international update, NAIC staff reported that the International Association of Insurance Supervisors (“IAIS”) has launched its Global Monitoring Exercise (“GME”), including related data calls, with a deadline of May 10, 2023 for individual insurers to submit their applicable reports. As part of this process, the IAIS will also be seeking information on reinsurance and climate-related risks from the applicable insurers. Further, the IAIS plans to conclude its periodic review of the GME individual insurer monitoring assessment methodology this year.


It is likely that there will be further developments with respect to the above updates, particularly the considerations which have been raised with respect to private equity-owned insurers. We will continue to track and report on these developments.

To view additional updates from the US NAIC Spring 2023 National Meeting, visit our meeting highlights page.



1 For additional background on the NAIC Joint Group’s regulatory considerations for private equity-owned insurers, view our previous Legal Update “US NAIC Summer 2022 National Meeting Highlights: Private Equity Ownership of Insurers” or listen to our podcast “Increased Scrutiny of Private Equity Ownership of Insurers.” Consideration 9 (Asset Manager Affiliates and Disclaimers of Affiliation) was referred to the Statutory Accounting Principles (E) Working Group; Consideration 10 (Privately Structured Securities) was referred to the Life Actuarial (A) Task Force, Valuation of Securities (E) Task Force and Risk-Based Capital Investment Risk and Evaluation (E) Working Group; and Consideration 11 (Reliance on Rating Agencies) was referred to the Valuation of Securities (E) Task Force.

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