HB 401-INSURANCE; REINSURANCE;VALUATION; CREDITS  3:32:58 PM CHAIR COSTELLO announced the consideration of HB 401. [CSHB 401(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.