Vote Recommendation | Economic Freedom | Property Rights | Personal Responsibility | Limited Government | Individual Liberty |
---|---|---|---|---|---|
No | Negative | Negative | Neutral | Negative | Neutral |
Relating to own risk and
solvency assessment by insurers and insurance groups; providing a penalty.
No significant fiscal implication to the State is anticipated.
SB 655 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 SB 655 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 SB 655, especially since this bill puts an insurer’s
proprietary information at greater risk of getting into the wrong hands. 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 SB 655 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.