Monthly LRA Update

REGULATORY DEVELOPMENTS

NAIC Releases Draft Model Law for Insurance

On February 1 the NAIC Privacy Protections Working Group released a draft of a new model law (Model Law #674). This Draft Model Law seeks to establish standards for the collection, processing, retaining, and sharing of consumers’ personal information by licensees. It also sets forth standards for additional permitted transactions involving consumers’ personal information as well as standards governing licensees’ collection, processing, retention, and sharing of personal information.

Aspects of this Draft Model Law That May Be of Interest to BOLI Insurers and Licensees

Although the Draft Model Law appears geared toward personal lines insurance businesses, it defines “consumer” as follows (emphasis added):

“Consumer” means an individual and the individual’s legal representative, including a current or former (i) applicant, (ii) policyholder, (iii) insured, (iv) beneficiary, (v) participant, (vi) annuitant, (vii) claimant, or (viii) certificate holder who is a resident of this state and whose personal information is used, may be used, or has been used in connection with an insurance transaction.

Note that the NAIC draft includes a comment that this definition is similar to that in current Model Law #672.

Section 6 requires a licensee to provide certain notices to consumers.

Section 7 sets forth the content that must be included in consumer notices. Notable requirements include (among others)

● Whether personal information has been or may be collected from any sources other than the consumer, and whether such information is collected by the licensee or by a third-party service provider;

● The specific types of personal information that may be collected, processed or retained;

● The specific purposes for which the licensee collects, processes, retains, or shares personal information;

● A summary of the reasons the licensee or any third-party service provider retains personal information and the approximate period of retention.

A further information practice notice is required annually to each consumer with whom the licensee has an ongoing business relationship. The Draft Model Law does not define an ongoing business relationship.

Procedural Status

This Draft Model Law is open for comments through April 3. The Working Group plans to have a revised proposal ready to be voted on during the NAIC’s Summer National Meeting in August.

OTHER DEVELOPMENTS

SECURE 2.0 Creates New Opportunity to Use Surplus Pension Assets for Retiree Welfare Benefits

On February 8 the Groom Law Group published a report describing an amendment to IRC Section 420 enacted as part of the Consolidated Appropriations Act, 2023.

According to Groom’s report, IRC Section 420 allows certain transfers of assets in an overfunded pension plan to a separate health benefits “401(h) account” or an applicable life insurance account that is part of that plan, to provide the retiree health and/or group term life insurance benefits. Groom observes that SECURE 2.0 reduces the level of surplus pension assets that a plan must hold to make a de minimis transfer from 175% to 110%.

Please refer to the Groom report for further details.

U.S. Unveils New Economic Sanctions on Russia

On February 24 the U.S. expanded economic sanctions on Russian interests in coordination with the G-7. According to the press release, the new sanctions focus on the financial sector, military supply chains, metals and mining sector, and certain individuals and entities believed to be involved in evading existing sanctions.

We have reviewed clients’ Separate Account BOLI holdings to verify that none of the current positions list Russia as the country of domicile or exposure. As such, we do not expect the new round of sanctions to impact BOLI portfolios.