October 22, 2024
NAIC Summer 2024 Meeting Summary
Johnson Lambert LLP is dedicated to keeping you informed of changes adopted by the NAIC. In this edition, you’ll find a summary of statutory accounting adoptions made by the Statutory Accounting Principles Working Group (SAPWG) during the Summer National Meeting that will impact statutory basis financial statements and the latest updates on activities of the Cybersecurity Work Group and the Climate and Resiliency Task Force.
Statutory Accounting Updates
Cybersecurity (H) Work Group
The Cybersecurity Working Group heard a presentation on The State of the Cyber Insurance Market focusing on trends, challenges, and opportunities. The cybersecurity landscape has evolved over the past decade, with ransomware adding a new dimension to existing threats such as data breaches and litigation. During the COVID-19 pandemic, ransomware became a major topic and the interest level in cybersecurity increased. The underwriting process is evolving as insureds, increasingly knowledgeable about ransomware, demand more specific coverage and detailed explanations of their protection against these attacks. As a result, minimum coverage levels are increasing. This shift is also forcing brokers and insureds to become more knowledgeable about cybersecurity and the policy wording needed to address their specific concerns. Successfully selling cybersecurity coverage requires a consultative approach to help companies understand their risks and recognize the value of this protection. The presentation concluded with a recommendation to regulators to be open to using data analysis to reduce policyholder risk and emphasized the importance of how fundamentally different cybersecurity is from most insurance coverages.
Climate and Resiliency (EX) Task Force
The Climate and Resiliency Task Force heard a presentation from reThought Flood, a flood insurance managing general agent (MGA), on innovative flood insurance products. There is a protection gap in flood insurance driven by 1) insurers that are concerned about deploying capacity, 2) agents that are not confident in selling that flood insurance is a value, and 3) insureds that are not aware they need coverage. The vision of reThought Flood is to increase capacity for writers of flood insurance and increase the number of policyholders with flood insurance protection. When there are more insurers writing the insurance, there will be better coverage and more reasonable premiums. In terms of mitigating damage, models can predict what flooding will look like with a high level of precision, which can make education and mitigation strategies more effective in the long run.
The Task Force also heard a Global Risks Report 2024 presentation from Marsh McLennan covering the shift in focus from economic risks over the past ten years to more of a focus on environmental risks as well as most recently technology risk. The top three risks companies are concerned about in the near term include: 1) Technology risks including misinformation/disinformation and cybersecurity, 2) Environmental risks like extreme weather events and pollution, and 3) Societal risks including polarization and lack of economic opportunity. Current impacts from these risks include AI-generated misinformation and cyber attacks and distressed supply chains coming from geopolitical impacts and extreme weather events. Insurers are encouraged to take a longer term view of risks and build resilience into their organizations. The current growth in alternative risk structures including risk mutualization, captive insurance companies, and special purpose reinsurance vehicles is expected to continue as insurers look for affordable ways to address risk.
If you have any questions about the Summer National Meeting update, you can contact us here.
