SF 2131 – Principle-based Reserves
SF 2132 – IUB non-substantive omnibus
SF 2133 – Federal Home Loan Bank rights
COMMITTEE ACTION:
SF 2131 (SSB 3089) is a recommendation by the Iowa Insurance Division dealing with principle-based reserving (PBR) for life insurance policies and efforts nationwide to develop a formula that allows for flexibility. PBR seeks to “right-size” the reserves to be held in the future, based on a Standard Valuation Manual developed by the National Association of Insurance Commissioners (NAIC). Some insurance companies will be required to hold a higher minimum level of reserves, while others will have a lower minimum established, depending on the nature of their product guarantees and risk. In this legislation, the changes to the NAIC’s Standard Valuation Model and adoption of the Non-Forfeiture Model will collectively implement PBR.
The net impact of these two models is to change the standard to be met for the reserves to be held by the life insurance companies regulated by the Division under Iowa Code Chapter 508. Currently, a formulaic and static approach is used in Iowa. PBR allows the use of more advanced methodologies to better reflect and measure the risks of new, innovative life insurance products. This law will not go into effect until 42 states representing 75 percent of the business have adopted the PBR model, with an additional three-year transition period before compliance is required. So far, 11 states have adopted PBR and others have proposals in process. [2/6: short form]
SF 2132 (SSB 3092) is a recommendation by the Iowa Utilities Board (IUB) that removes obsolete telecommunications statutes but does not modify the current regulatory requirements. Examples of obsolete language now in Iowa Code are a report that was delivered to the General Assembly in 2005; 1995 rule-making provisions that have long been completed; and filing requirements for local exchange carriers enacted in 1995 then superseded by federal law in 1996. The IUB conducted an extensive Notice of Inquiry process over the past year so that the public and industry stakeholders had ample opportunity to review and comment on the draft proposal. Fifteen companies, organizations and the Iowa Consumer Advocate filed a total of 31 comments and suggestions prior to the final IUB legislative recommendation. [2/6: short form]
SF 2133 (SSB 3120) relates to the rights of a Federal Home Loan Bank (FHLB) regarding collateral pledged by insurer-members. It includes language that states an FHLB cannot be stayed or prohibited from exercising its rights regarding collateral pledged by insurer-members in delinquency or receivership proceedings. After committee discussion, an amendment will be offered that modifies that provision to “after the seventh day following the filing of a delinquency proceeding.” The FHLB system was established by Congress in 1932 to support mortgage lending. The FHLB Des Moines is the largest of the country’s 12 regional banks, with 1,200 insurer-members in Iowa, Minnesota, Missouri, North Dakota and South Dakota. It partners with community and commercial banks, credit unions, thrifts, insurance companies and community development financial institutions to provide readily available, low-cost liquidity to local lenders in all economic cycles. FHLBs are governed by the Federal Housing Finance Agency; are cooperatively owned by their members; operate independently with their own boards of directors; and are registered with the Securities and Exchange Commission. [2/6: short form]