COVID-19-related insurance regulatory developments for the week of March 23


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This alert summarizes some of the most notable COVID-19-related insurance regulatory developments over the past week, including state-mandates for deferral of premium payment deadlines, and the impact of COVID-19 on international regulatory initiatives. For an update on recent guidance from the New York Department of Financial Services on electronic signatures, transactions and filings with DFS see our Legal Alert. For a discussion and analysis of COVID-19-related business interruption (BI) coverage issues, see our dedicated site, here. I. Premium Payment Deferrals and Related Accounting Treatment On March 30, 2020, following an executive order by the Governor of New York, the DFS issued an emergency regulation requiring insurers to grant premium payment relief to New York consumers and small businesses experiencing financial hardship due to COVID-19. With respect to life insurance policies and annuity contracts, insurers are prohibited from cancelling policies/contracts that are 90 days or less overdue. With respect to property/casualty insurance policies, including policies written on a surplus lines basis (known as “excess lines” in New York), insurers are prohibited from cancelling policies that are 60 days or less overdue. For purposes of the regulation, a “small business” is defined as any business that is resident in New York, is independently owned and operated, and employs 100 or fewer individuals. Insurers are required to accept a written attestation from a policyholder as proof of financial hardship as a result of COVID-19. The emergency regulation also provides that, with respect to any policyholder that did not timely pay premium and who attests to experiencing financial hardship due to COVID-19: Insurers may not impose any late fees relating to such late premium payments; Insurers may not report the policyholder to a credit reporting agency or refer the policyholder to a debt-collection agency with respect to such late premium payments; Insurers must permit affected policyholders who do not make a timely premium payment, and who attest to still experiencing financial hardship due to COVID-19, to pay such late premium over a 12-month period; No later than April 13, 2020: With each insurance premium bill, insurers must include a notice of the provisions of the emergency regulation and a toll-free number that the policyholder may call to discuss billing and make alternative payment arrangements. Each insurer must notify insurance producers and any third-party administrators with which the insurer does business of the provisions of the emergency regulation. Licensed insurance producers who service an in-force life insurance policy, annuity contract, or fraternal benefit society certificate for a New York policyholder or who procured a property/casualty insurance policy for a New York policyholder, must mail or deliver notice to the policyholder of the provisions of the emergency regulation. A number of other states have taken similar action over recent weeks, including Maryland, Mississippi, Missouri, Ohio, Vermont and Washington, by issuing notices calling on insurers to “relax” or “be flexible” with regard to premium due dates, or requiring premium deferral as New York has. For example, on March 18, 2020, the California Department of Insurance (CDI) released a notice requesting that insurance companies provide their insureds with a 60-day grace period to pay insurance premiums so that insurance policies are not cancelled for nonpayment. The CDI request is directed to all admitted and non-admitted insurance companies that provide any insurance coverage in California, including life, health, auto, property, casualty, and other types of insurance. In addition, the CDI notice requests that all insurance agents, brokers, and other licensees who accept premium payments on behalf of insurers take steps to ensure that customers have the ability to make prompt insurance payments, including adopting alternate methods of payment such as online payments. Insurers that adhere to these premium grace periods may be required to non-admit the premium receivable asset, because under US Statutory Accounting Principles, premium receivables that are more than 90 days past due must be non-admitted. The Maryland bulletin noted above provides that Maryland-domiciled insurers that provide premium grace periods to policyholders may request a permitted accounting practice to waive this requirement for 2020, with the number of permitted days past due to be based on the insurer’s grace period. The American Property Casualty Insurance Association (APCIA) has also announced that they are working in conjunction with the National Association of Insurance Commissioners (NAIC) to identify a nationwide solution. II. International Regulatory Developments On March 26, 2020, the International Association of Insurance Supervisors (IAIS) Executive Committee held a conference call to discuss the impact of COVID-19 on the global insurance sector and the activities of the IAIS, including implementation of the Insurance Capital Standard and the Holistic Framework for the mitigation of systemic risk in the global insurance sector. Following the call, the IAIS announced that it will be taking the following actions to provide operational relief to IAIS member supervisors, insurers and other stakeholders during the COVID-19 pandemic: Undertake a targeted assessment of the impact of COVID-19 on the global insurance sector using the framework that the IAIS has developed for forward-looking risk assessment; Review, in consultation with the Financial Stability Board (FSB), the 2020 timelines for the implementation of the Holistic Framework for the mitigation of systemic risk in the global insurance sector; Review and adjust the timelines for the data collection for the ICS confidential reporting in 2020, as well as the Aggregation Method (AM) data collection being supported by the IAIS. As a first step, the IAIS is extending the submission deadline to October 31, 2020, and such submissions should be made on a best efforts basis. Additionally, the IAIS intends to reschedule the July 2020 consultation for the work plan to establish high-level principles that will inform the development of criteria to assess whether the AM provides comparable outcomes to the ICS; and Postpone development of supporting materials (e.g., issues papers and application papers providing guidance on supervisory practices) and generally defer public consultations by at least six months. In addition, the IAIS is taking steps to safeguard the well-being of members, stakeholders and staff, while maintaining operations, including: Replacing in-person Working Group meetings with conference calls, as appropriate, through to September 2020; and Cancelling the June 2020 Committee meetings and Global Seminar, which was scheduled to be in Seattle, Washington. The in-person Committee meetings will be replaced with conference calls, as appropriate, and the IAIS is currently exploring other virtual means for engaging with stakeholders in lieu of the Global Seminar. Finally, the IAIS stated that further steps will be taken, as necessary, to coordinate the actions taken by IAIS members to mitigate the impact of COVID-19 on insurers, safeguard policyholders and contribute to the maintenance of financial stability. _____ If you have any questions about this legal alert, please feel free to contact any of the attorneys listed under Related People/Contributors or the Eversheds Sutherland attorney with whom you regularly work. The materials on the Eversheds Sutherland website are for general information purposes only and do not constitute legal advice. While reasonable care is taken to ensure accuracy, the materials may not reflect the most current legal developments. Eversheds Sutherland disclaims liability for actions taken based on the materials. 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There continues to be significant regulatory activity related to the novel coronavirus (COVID-19) and its impact on the insurance industry, including suspension of the National Association of Insurance Commissioners (NAIC) Virtual Spring National Meeting to allow regulators and their staff more time to focus on the pandemic response. This alert summarizes some of the most notable COVID-19-related insurance regulatory developments over the past week, including state-mandates for deferral of premium payment deadlines, and the impact of COVID-19 on international regulatory initiatives. For an update on recent guidance from the New York Department of Financial Services on electronic signatures, transactions and filings with DFS see our Legal Alert. For a discussion and analysis of COVID-19-related business interruption (BI) coverage issues, see our dedicated site, here.

I. Premium Payment Deferrals and Related Accounting Treatment

On March 30, 2020, following an executive order by the Governor of New York, the DFS issued an emergency regulation requiring insurers to grant premium payment relief to New York consumers and small businesses experiencing financial hardship due to COVID-19. With respect to life insurance policies and annuity contracts, insurers are prohibited from cancelling policies/contracts that are 90 days or less overdue. With respect to property/casualty insurance policies, including policies written on a surplus lines basis (known as “excess lines” in New York), insurers are prohibited from cancelling policies that are 60 days or less overdue. For purposes of the regulation, a “small business” is defined as any business that is resident in New York, is independently owned and operated, and employs 100 or fewer individuals. Insurers are required to accept a written attestation from a policyholder as proof of financial hardship as a result of COVID-19.

The emergency regulation also provides that, with respect to any policyholder that did not timely pay premium and who attests to experiencing financial hardship due to COVID-19:

Insurers may not impose any late fees relating to such late premium payments;
Insurers may not report the policyholder to a credit reporting agency or refer the policyholder to a debt-collection agency with respect to such late premium payments;
Insurers must permit affected policyholders who do not make a timely premium payment, and who attest to still experiencing financial hardship due to COVID-19, to pay such late premium over a 12-month period;
No later than April 13, 2020:
- With each insurance premium bill, insurers must include a notice of the provisions of the emergency regulation and a toll-free number that the policyholder may call to discuss billing and make alternative payment arrangements.
- Each insurer must notify insurance producers and any third-party administrators with which the insurer does business of the provisions of the emergency regulation.
- Licensed insurance producers who service an in-force life insurance policy, annuity contract, or fraternal benefit society certificate for a New York policyholder or who procured a property/casualty insurance policy for a New York policyholder, must mail or deliver notice to the policyholder of the provisions of the emergency regulation.

A number of other states have taken similar action over recent weeks, including Maryland, Mississippi, Missouri, Ohio, Vermont and Washington, by issuing notices calling on insurers to “relax” or “be flexible” with regard to premium due dates, or requiring premium deferral as New York has. For example, on March 18, 2020, the California Department of Insurance (CDI) released a notice requesting that insurance companies provide their insureds with a 60-day grace period to pay insurance premiums so that insurance policies are not cancelled for nonpayment. The CDI request is directed to all admitted and non-admitted insurance companies that provide any insurance coverage in California, including life, health, auto, property, casualty, and other types of insurance. In addition, the CDI notice requests that all insurance agents, brokers, and other licensees who accept premium payments on behalf of insurers take steps to ensure that customers have the ability to make prompt insurance payments, including adopting alternate methods of payment such as online payments.

Insurers that adhere to these premium grace periods may be required to non-admit the premium receivable asset, because under US Statutory Accounting Principles, premium receivables that are more than 90 days past due must be non-admitted. The Maryland bulletin noted above provides that Maryland-domiciled insurers that provide premium grace periods to policyholders may request a permitted accounting practice to waive this requirement for 2020, with the number of permitted days past due to be based on the insurer’s grace period. The American Property Casualty Insurance Association (APCIA) has also announced that they are working in conjunction with the National Association of Insurance Commissioners (NAIC) to identify a nationwide solution.

II. International Regulatory Developments

On March 26, 2020, the International Association of Insurance Supervisors (IAIS) Executive Committee held a conference call to discuss the impact of COVID-19 on the global insurance sector and the activities of the IAIS, including implementation of the Insurance Capital Standard and the Holistic Framework for the mitigation of systemic risk in the global insurance sector. Following the call, the IAIS announced that it will be taking the following actions to provide operational relief to IAIS member supervisors, insurers and other stakeholders during the COVID-19 pandemic:

Undertake a targeted assessment of the impact of COVID-19 on the global insurance sector using the framework that the IAIS has developed for forward-looking risk assessment;
Review, in consultation with the Financial Stability Board (FSB), the 2020 timelines for the implementation of the Holistic Framework for the mitigation of systemic risk in the global insurance sector;
Review and adjust the timelines for the data collection for the ICS confidential reporting in 2020, as well as the Aggregation Method (AM) data collection being supported by the IAIS. As a first step, the IAIS is extending the submission deadline to October 31, 2020, and such submissions should be made on a best efforts basis. Additionally, the IAIS intends to reschedule the July 2020 consultation for the work plan to establish high-level principles that will inform the development of criteria to assess whether the AM provides comparable outcomes to the ICS; and
Postpone development of supporting materials (e.g., issues papers and application papers providing guidance on supervisory practices) and generally defer public consultations by at least six months.

In addition, the IAIS is taking steps to safeguard the well-being of members, stakeholders and staff, while maintaining operations, including:

Replacing in-person Working Group meetings with conference calls, as appropriate, through to September 2020; and
Cancelling the June 2020 Committee meetings and Global Seminar, which was scheduled to be in Seattle, Washington. The in-person Committee meetings will be replaced with conference calls, as appropriate, and the IAIS is currently exploring other virtual means for engaging with stakeholders in lieu of the Global Seminar.

Finally, the IAIS stated that further steps will be taken, as necessary, to coordinate the actions taken by IAIS members to mitigate the impact of COVID-19 on insurers, safeguard policyholders and contribute to the maintenance of financial stability.
_____

If you have any questions about this legal alert, please feel free to contact any of the attorneys listed under Related People/Contributors or the Eversheds Sutherland attorney with whom you regularly work.

The materials on the Eversheds Sutherland website are for general information purposes only and do not constitute legal advice. While reasonable care is taken to ensure accuracy, the materials may not reflect the most current legal developments. Eversheds Sutherland disclaims liability for actions taken based on the materials. Always consult a qualified lawyer for specific legal matters. To view the full disclaimer, see our Terms and Conditions or Disclaimer section in the footer.