04/20/2018 03:30 PM Senate LABOR & COMMERCE

        HB 401-INSURANCE; REINSURANCE;VALUATION; CREDITS                                                                    
                                                                                                                                
3:32:58 PM                                                                                                                    
CHAIR  COSTELLO  announced the  consideration  of  HB 401.  [CSHB
(L&C) was before the committee.]                                                                                             
                                                                                                                                
3:33:29 PM                                                                                                                    
LORI WING-HEIER,  Director, Division of Insurance,  Department of                                                               
Commerce, Community and  Economic Development (DCCED), Anchorage,                                                               
Alaska, explained that  HB 401 would ensure that  the Division of                                                               
Insurance   retains  accreditation.   This   is  the   reciprocal                                                               
agreement among  states that all insurance  companies will adhere                                                               
to  the  same  solvency  standards. Sections  1-5  relate  to  an                                                               
accreditation standard  as of January  1, 2019 and  the remainder                                                               
of  the  sections  relate  to an  accreditation  standard  as  of                                                               
January 1, 2020.                                                                                                                
                                                                                                                                
Sections  1-5  address credit  for  reinsurance.  They allow  the                                                               
Division of Insurance  to more closely examine  the reinsurance a                                                               
domiciled insurer is buying from a  reinsurer that may or may not                                                               
be  outside the  U.S. The  division will  have more  insight into                                                               
what those insurance companies have  in terms of financial assets                                                               
and their  solvency. With greater  knowledge of solvency,  it may                                                               
not be necessary  for an insurer to put  up dollar-for-dollar for                                                               
their expected loss exposure                                                                                                    
                                                                                                                                
The second  part of the bill  addresses principle-based reserving                                                               
(PBR). That is updating standards  on how reserves are calculated                                                               
for life  insurance. The methodology  has not been updated  for a                                                               
number of years and the products have changed considerably.                                                                     
                                                                                                                                
3:36:57 PM                                                                                                                    
CHAIR  COSTELLO  welcomed  Senator  Stevens  and  noted  who  was                                                               
available to answer questions.                                                                                                  
                                                                                                                                
3:37:25 PM                                                                                                                    
SENATOR GARDNER asked if anyone opposed the bill.                                                                               
                                                                                                                                
MS.  WING-HEIER said  no;  the bill  is  National Association  of                                                               
Insurance Commissioners  (NAIC) model  legislation that  has been                                                               
thoroughly  vetted  by  the insurance  industry,  consumers,  and                                                               
regulators.                                                                                                                     
                                                                                                                                
SENATOR MICCICHE  questioned why  large issues like  this weren't                                                               
federally regulated.                                                                                                            
                                                                                                                                
MS.  WING-HEIER explained  that insurance  had been  regulated at                                                               
the state  level for  more than  a hundred  years. Also,  if they                                                               
were asked, regulators  nationwide would say the  big reason they                                                               
support state regulation  is because they don't want  to lose the                                                               
premium taxes.  Secondarily they  would point out  that different                                                               
states have different risks.                                                                                                    
                                                                                                                                
SENATOR  MICCICHE opined  that there  should be  a separation  of                                                               
premium taxes and having a standard across the states.                                                                          
                                                                                                                                
MS. WING-HEIER said she didn't  disagree in some respects because                                                               
the  division   spends  a  lot  of   time  updating  legislators,                                                               
legislation, and regulators at a state level for conformity.                                                                    
                                                                                                                                
3:39:13 PM                                                                                                                    
CAITLYN ELLIS,  Staff, Representative Sam Kito  III, Alaska State                                                               
Legislature,   Juneau,   Alaska,   advised  that   the   National                                                               
Association  of  Insurance  Commissioners  (NAIC)  developed  the                                                               
model legislation upon which HB  401 is based, but enforcement is                                                               
left to the state.                                                                                                              
                                                                                                                                
MS. WING-HEIER  added that the  only federal involvement  she was                                                               
aware  of was  that the  federal office  of insurance,  which was                                                               
established  under President  Obama, looks  at some  products and                                                               
where they are going.                                                                                                           
                                                                                                                                
3:40:03 PM                                                                                                                    
CHAIR COSTELLO opened public testimony on HB 401.                                                                               
                                                                                                                                
3:40:17 PM                                                                                                                    
JANA-LEE  PRUITT, Regional  Vice President,  American Council  of                                                               
Life Insurers,  testified in strong  support of HB 401.  She said                                                               
HB  401 would  repeal  and reenact  portions  of Alaska  statutes                                                               
governing  credit for  reinsurance.  This  makes them  consistent                                                               
with the current  NAIC credit for reinsurance model  law that was                                                               
updated in 2011 and 2016  to modernize reinsurance regulations in                                                               
the U.S.                                                                                                                        
                                                                                                                                
HB 401 would  also amend Alaska's valuation law  to be consistent                                                               
with  the  NAIC  standard  valuation law.  It  changes  how  life                                                               
insurers calculate reserves to pay  future expected claims from a                                                               
one-size-fits-all   approach   to  one   called   principle-based                                                               
reserves (PBR).  The latter ensures  that the reserves  match the                                                               
actual risk being assumed by the insurer.                                                                                       
                                                                                                                                
3:42:07 PM                                                                                                                    
CHAIR  COSTELLO  found  no further  comments  and  closed  public                                                               
testimony on HB 401. She looked to the will of the committee.                                                                   
                                                                                                                                
3:42:14 PM                                                                                                                    
SENATOR  MICCICHE  moved  to  report  HB  401,  version  D,  from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note(s).                                                                                                                        
                                                                                                                                
CHAIR COSTELLO  found no objection  and CSHB 401(L&C)  moved from                                                               
the Senate Labor and Commerce Standing Committee.