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Relating to own risk and
solvency assessment by insurers and insurance groups; providing a penalty.
HB 1730 would add
Chapter 830 in the Insurance Code relating to require insurers to conduct an
internal audit through an own risk and solvency assessment (ORSA). The purpose
of this chapter would be to provide each insurer with a risk management
framework and provide guidelines for implementing and filing an ORSA with the
commissioner of insurance.
Chapter 830 would
require insurers to conduct an ORSA annually or anytime there are significant
changes to its risks. They would have to submit a summary report of the
ORSA results to the commissioner. However, the chapter would allow the
commissioner to issue waivers for unique circumstances that exempts insurers
from conducting ORSAs.
Since a summary report
contains sensitive information relating to an insurer’s proprietary information,
a few sections of the chapter concern the confidential nature of this
information by issuing requirements for the handling of this information by the
commissioner. The chapter allows the commissioner to share the summary report
with the National Association of Insurance Commissioners (NAIC), but the
commissioner and NAIC must enter into an agreement that specifies procedures
and protocols for handling this confidential information.
Lastly, this
legislation would permit the commissioner to issue an administrative penalty
under Chapter 84 of the Insurance Code if an insurer fails to file the summary
report in a timely manner.
NAIC recently adopted
the ORSA Model Act, which was created in response to the financial crisis of
2008. Since then, insurance commissioners from some other states have applied
this model to their state’s laws. ORSA is an internal auditing process
conducted by an insurer that assesses its financial condition by the amount of
risk it is undertaking.
The author’s statement
of intent for HB 1730 says that ORSA is needed to help the commissioner of
insurance better monitor the risks and solvency of insurance companies.
Additionally, the author believes the complicated business structure of
insurance companies requires a closer eye on these companies.
The business
structures of insurance companies may be more complicated, but we cannot find
justification for implementing such intrusive measures such as HB 1730,
especially since this bill puts an insurer’s proprietary information at greater
risk of getting into the wrong hands. The government, even in the context of a
highly regulated industry, should not be responsible for the ultimate financial
condition of private companies. Furthermore, nothing is stopping insurance
companies from conducting these assessments on their own if they think it is in
their own best interest to do so.
We oppose HB 1730 because
it infringes on the free market and the private property rights of the insurers
and because it expands the state government's role by applying yet another
mandate to private industry.