COVID-19-related insurance regulatory developments

The NAIC has developed an information request template[13] for state insurance regulators to use in collecting information from US insurance groups and legal entities on their preparation for and exposure to COVID-19. As reported in our prior legal alert[14], New York was the first state to issue such a request, when on March 10 NYDFS issued a letter to all New York-licensed insurers requesting assurance they have preparedness plans to address the operational risk posed by COVID-19 and are identifying, monitoring, and managing the related financial risk. Since that time, nearly every state has issued a similar request to insurers domiciled in their state based on the NAIC template.

Like the New York request, the NAIC template requests information related to (1) the operational impact of COVID-19 and steps taken by companies to implement an effective Business Continuity Plan and/or COVID-19 response plan to support ongoing operations, and (2) the financial impact of COVID-19 on company solvency and steps taken by companies to both assess their exposures and address any concerns identified. The NAIC template was prepared such that it can be submitted on a group basis to an insurance group’s Lead State regulator (if applicable), although certain requests are required to take legal entity impacts into consideration. The template states that information received through the template will be treated as confidential and will be shared with other state insurance departments through the NAIC’s Master Information Sharing and Confidentiality Agreement to reduce the need for duplicative and overlapping information requests.

IV. COVID-19 as a Covered Workplace Injury

A growing number of states have enacted or proposed legislation, or have issued executive orders or regulatory guidance, declaring that COVID-19 illnesses sustained by workers or specified classes of workers, such as first responders, healthcare workers and workers who continue to work during the pandemic because they are deemed essential, to be workplace injuries that are compensable under state workers’ compensation laws and policies. Typically, workers’ compensation policies would not cover illness sustained by an employee during the course of employment unless a causal link between the workplace and the illness is established by evidence. However, with a growing push for businesses to reopen and workers to return to the workplace, states are taking action to assure employers (and their employees) that they will be protected if and when they return to work. While well intentioned, these state actions (like the proposed expansion of BI coverage noted above) threaten the assumptions that underpin the pricing of workers’ compensation insurance policies.

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