Regulator’s view: Wisconsin Commissioner Nathan Houdek on challenges in 2022
Nathan Houdek, Commissioner of Insurance for the State of Wisconsin, at the Office of the Commissioner of Insurance, the regulatory agency in the state, gives his views on the pressing issues and those that he sees indicative of the industry everywhere.
Andrew Putwainposted on Wednesday, August 31, 2022
Andrew Putwain: What is the Wisconsin Office of the Commissioner of Insurance’s (OCI) approach to monitoring insurance investments and are there issues that your organisation, as a regulatory body, are focused on for 2022 and going into 2023?
Nathan Houdek: We work with insurers that need assistance in interpreting our state statutes and codes to determine investments that are allowed in Wisconsin.
"We expect to continue to see changing investment vehicles and increased complexities in this area."
As with all regulators, we are concerned with regulatory arbitrage that can take place by misclassifying investments to get a better Risk-Based Capital (RBC) charge. Looking ahead, we expect to continue to see changing investment vehicles and increased complexities in this area.
We do not expect to release any new investment-related regulations in the next year.
Andrew: What are some of the key issues the OCI has raised around investment and asset management with those in the industry over the past 12 months – be it risk, solvency, capital allocation, capital reserves or ESG and sustainability?
Nathan: Overall, Wisconsin domestic insurers tend to be conservative with their investment portfolios. We monitor issues that may arise in this area to ensure that our companies remain stable for their consumers.
We are concerned about risk and risk classification when it comes to the capital charge for structured securities and OCI serves as a member of the National Association Of Insurance Commissioners Risk-Based Capital (NAIC RBC) Investment Risk and Evaluation Working Group to stay abreast of changes that may impact Wisconsin.
"Through our involvement with the NAIC, we are monitoring changes and getting a better understanding of structured securities to evaluate the level of risk in various tranches."
Andrew: Are insurers coming to you for advice on specific areas they need guidance on such as tech modernisation/digitisation or treasury & cash management, and are these new areas or areas that are seeing a significant upswing in attention?
Nathan: Our statutes provide some guidelines for what insurers can invest in. Through our involvement with the NAIC, we are monitoring changes and getting a better understanding of structured securities to evaluate the level of risk in various tranches.
We know our insurers are monitoring [ESG and Sustainability] and evaluating their options, but they generally maintain diverse insurance portfolios.
Andrew: In terms of policy, what feedback are you getting on inflation, interest rates and other macroeconomic issues – and is this a key concern for insurers?
Nathan: The long period of low interest rates has concerned regulators and the insurance industry. Insurers have been modelling this potential increase in interest for years, however, so they have positioned themselves well to manage this environment.