INSURANCE DEPARTMENT [ 31 PA. CODE CH. 118a ] Property and Casualty Actuarial Opinion [41 Pa.B. 602]
[Saturday, January 29, 2011]The Insurance Department (Department) adopts Chapter 118a (relating to property and casualty actuarial opinion).
Statutory Authority
The final-form rulemaking is adopted under the authority of sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. §§ 66, 186, 411 and 412), regarding the general rulemaking authority of the Department; sections 320 and 655 of The Insurance Company Law of 1921 (40 P. S. §§ 443 and 815), regarding the authority of the Insurance Commissioner (Commissioner) to require insurance companies, associations and exchanges to file statements concerning their affairs and financial condition; and sections 205 and 206 of The Pennsylvania Fair Plan Act (40 P. S. §§ 1600.205 and 1600.206) and section 731 of the Medical Care Availability and Reduction of Error (MCARE) Act (40 P. S. § 1303.731), regarding, respectively, the specific regulatory and rulemaking authority of the Department regarding financial reporting by the Pennsylvania Fair Plan and the Pennsylvania Professional Liability Joint Underwriting Association.
Purpose
The purpose of this final-form rulemaking is to establish by regulation the requirements for statements of actuarial opinion and related documents filed by property and casualty insurers with the Department. Establishing these requirements by regulation for property and casualty insurers is consistent with the approach used to establish similar requirements for actuarial review of the reserves of life and health insurers under Chapter 84b (relating to actuarial opinion and memorandum). Section 320(a)(1) of The Insurance Company Law of 1921 requires insurers to file annual financial statements with the Department and additional statements concerning their affairs and financial condition as the Commissioner may, in the Commissioner's discretion, require. Section 320(a)(2) of The Insurance Company Law of 1921 further requires insurers to adhere to the instructions and accounting practices and procedures prescribed by the National Association of Insurance Commissioners (NAIC) unless otherwise provided by law, regulation or order of the Commissioner. Under this authority, the Commissioner requires property and casualty insurers to include statements of actuarial opinion with annual financial statements filed on or before the first day of March and domestic property and casualty insurers to file an actuarial opinion summary on or before the 15th day of March each year. These filings shall be prepared as prescribed by the NAIC's annual statement instructions and include the actuary's opinion with respect to the proper establishment and adequacy of the insurer's reserves. If requested by the Department, domestic insurers shall also submit the supporting actuarial report and workpapers on or before the first day of May each year. The Department reviews this information in conducting financial analyses and onsite financial examinations of domestic insurers.
Specifically, Chapter 118a clarifies requirements for the filing of the actuarial opinion summary, which became effective for financial statements reporting an insurer's condition as year-end 2005. The actuarial opinion summary provides the Department with information needed to quickly identify insurers with potential reserving problems and then focus heightened solvency monitoring efforts on those insurers. Therefore, Chapter 118a will strengthen the Department's financial regulation tools to the extent it clarifies and supplements the Department's statutory authority and related NAIC instructions for actuarial opinions and related documents filed by property and casualty insurers doing business in this Commonwealth.
Comments and Response
Notice of proposed rulemaking was published at 40 Pa.B. 4966 (August 28, 2010) with a 30-day comment period. Comments supporting the rulemaking and recommending prompt promulgation were received from The Insurance Federation of Pennsylvania, Inc. The Independent Regulatory Review Commission (IRRC) reviewed the proposed rulemaking and did not have objections, comments or recommendations.
Affected Parties
Chapter 118a applies to insurers licensed to write property and casualty insurance in this Commonwealth, as provided under the scope and definitions of the authorizing statutes.
Fiscal Impact
State government
The final-form rulemaking clarifies and strengthens existing requirements. Department costs in monitoring the financial condition of insurers will not increase as a result of this final-form rulemaking.
General public
The public will benefit to the extent the final-form rulemaking strengthens financial solvency requirements for property and casualty insurers, thereby promoting the ability of those insurers to meet obligations under insurance policies and the Department's ability to minimize the number and impact of insurer insolvencies.
Political subdivisions
The final-form rulemaking will not impose additional costs on political subdivisions.
Private sector
The strengthened filing requirements in this final-form rulemaking are consistent with NAIC standards that became effective for annual financial statements as of year-end 2005. The information needed for the actuarial opinion summary due March 15 should be known to the insurer's appointed actuary when preparing the statement of actuarial opinion due March 1. Therefore, the final-form rulemaking should not impose significant additional costs on insurers in obtaining annual actuarial reviews and required supporting documentation.
Paperwork
The final-form rulemaking will not impose significant additional paperwork on the Department. Since the information required in the actuarial opinion summary should be included in the work done by actuaries in preparing actuarial reports and workpapers for statements of actuarial opinion already required to be filed with insurers' annual financial statements, additional paperwork requirements for affected insurers will be minimal.
Effectiveness/Sunset Date
The rulemaking will become effective upon final-form publication in the Pennsylvania Bulletin. The Department continues to monitor the effectiveness of regulations on a triennial basis; therefore, a sunset date has not been assigned.
Contact Person
Questions regarding the final-form rulemaking should be directed to Peter J. Salvatore, Regulatory Coordinator, Insurance Department, 1326 Strawberry Square, Harrisburg, PA 17120, (717) 787-4429, fax (717) 705-3873, psalvatore@state.pa.us.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on November 9, 2010, the Department submitted a copy of the notice of proposed rulemaking, published at 40 Pa.B. 4966 to IRRC and the Chairpersons of the Senate Banking and Insurance Committee and the House Insurance Committee for review and comment.
Under section 5(c) of the Regulatory Review Act, IRRC and the House and Senate Committees were provided with copies of the comments received during the public comment period, as well as other documents when requested. In preparing the final-form rulemaking, the Department has considered all comments from IRRC, the House and Senate Committees and the public.
Under section 5.1(j.2) of the Regulatory Review Act (71 P. S. § 745.5a(j.2)), on December 15, 2010, the final-form rulemaking was deemed approved by the House and Senate Committees. Under section 5.1(e) of the Regulatory Review Act, IRRC met on December 16, 2010, and approved the final-form rulemaking.
Findings
The Commissioner finds that:
(1) Public notice of intention to adopt these final-form regulations was given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and the regulations thereunder, 1 Pa. Code §§ 7.1 and 7.2.
(2) The adoption of this final-form rulemaking in the manner provided in this order is necessary and appropriate for the administration and enforcement of the authorizing statutes.
Order
The Commissioner, acting under the authorizing statutes, orders that:
(a) The regulations of the Department, 31 Pa. Code, are amended by adding §§ 118a.1—118a.7 to read as set forth at 40 Pa.B. 4966.
(b) The Department shall submit this order and 40 Pa.B. 4966 to the Office of General Counsel and Office of Attorney General for approval as to form and legality as required by law.
(c) The Department shall certify this order and 40 Pa.B. 4966 and deposit them with the Legislative Reference Bureau as required by law.
(d) The final-form rulemaking takes effect immediately upon publication in the Pennsylvania Bulletin.
ROBERT L. PRATTER,
Acting Insurance Commissioner(Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 41 Pa.B. 118 (January 1, 2011).)
Fiscal Note: Fiscal Note 11-245 remains valid for the final adoption of the subject regulations.
[Pa.B. Doc. No. 11-140. Filed for public inspection January 28, 2011, 9:00 a.m.]
