Trinidad Navarro: I was elected in 2016 as Delaware's Insurance Commissioner and re-elected in 2020.
Before that, I was a police officer for 20 years and a licenced insurance agent. After I retired from the police force in 2010, I was also the New Castle County Sheriff, which is an elected position.
I was elected to chair the National Association of Insurance Commissioners (NAIC) Anti-Fraud Task Force. Additionally, last year I was the vice chair of the D Committee, and also the Improper Marketing of Health Insurance working group. This year, I am the Vice Chair of the Northeast zone, so I’m a member of the Executive Committee within the NAIC.
My role as Insurance Commissioner is to protect the insurance buying public and monitor the solvency and regulatory compliance of Delaware-domiciled insurance companies by interacting directly with consumers and working collaboratively with the insurance companies.
Trinidad: Delaware has specific investment, risk-based capital (RBC) statutes, and policies that the department monitors – such as regulatory compliance involving investments which is done through regular reporting by carriers. The Department reviews this reporting with both in-house and outside analysts.
In addition, our examination team includes investment analysts to assist the Department with the more complex investment strategies within the current economic environment including Collateralised Loan Obligations (CLOs), credit-linked notes, hedges, and swaps.
"Our larger companies were not involved with private equity in the beginning
but, to stay competitive, have to become involved."
The goal is to maintain the balance of reviewing and reacting to investment strategies while ensuring that the company remains solvent.
Private equity investments in insurance companies is something that a lot of commissioners are concerned about. I’ve had candid conversations with some of our larger companies and they were not necessarily involved with private equity in the beginning but, to stay competitive, have to become involved.
The CLOs are concerning, in particular, because they bundle a lot of investments together that, in the right environment, can be profitable. However, in the wrong environment, the insurers might have focused on the long-term investments rather than the quick turnaround that some of these private equity firms are engaged in, which could create issues.
We have a good working relationship with all of our insurance company CEOs. They know where to call if they have an issue and we have them on speed dial as well. Any communication runs down the line of all levels, from analysts to our investigative staff and our legal team, so those lines of communication are always open.
Companies know consumer protection, company solvency, and regulatory compliance are our top priorities.
Trinidad: With respect to capital allocation, Delaware has specific minimal capital surplus requirements for licensure, which may increase following licence approval and depending on the type and the amount of risk being insured. We're in the process of increasing those minimums to be consistent with surrounding jurisdictions.
Some of our capital requirements were established decades ago, however. In the 1970s, the amount of capital required to start a new company was inadequate in today’s market because of inflation and other factors.
We’re working with the General Assembly to look at the capital allocations for investments and Delaware's specific statutory regulatory guidelines which have to be followed. When it comes to solvency, our Department, like most other jurisdictions, monitors RBC ratios through regular reporting.
Insurers, except for captives, are also required to perform their Own Risk and Solvency Assessment (ORSA) annually. This report requires information regarding future projections, stress testing, and explanations about how a company will meet future regulatory capital requirements.
When it comes to accreditation, most of our examiners and all of our analysts are in-house. A challenge other states have had is using contractors for financial examiners. We have ten now but added two more recently, which will take that number from about 14.5 companies per analyst down to something more manageable.
This is not necessarily an accreditation requirement, but accreditation looks at the financial examiners. While they don't frown upon contract workers, they do prefer them to be employees of the department
Trinidad: We're the fifth largest captive domicile in the world. We're well positioned here to attract new companies due to the experience of our staff.
"We saw a number of captives dissolving over the last three-to-four years, so
we’re looking at ways to be more attractive."
In 2022 we hired Steve Taylor, who was a regulator in Washington DC, to lead our Captive Bureau. We're making necessary regulatory changes in terms of how you look at captives to remain competitive. We have somewhere in the mid-seven hundreds of captives here. We saw a number of captives dissolving over the last three-to-four years, so we’re looking at ways to be more attractive.
We have a conditional licencing programme now where captive licenses are approved on a conditional basis and then over time we will review and approve a permanent licence. It's made us more attractive, and we're starting to licence more new captives rather than approving dissolutions – which hasn’t been the case for years.
Trinidad: Delaware's a small market and we look at the trends that happen across the country and the world.
Delaware does not formally track investment trends, but, anecdotally, we have noticed that some carriers are reflecting increasing returns with respect to investments in their limited partners (LPs) and limited liability companies (LLCs).
"Inflation's had a layered effect on investments. The concern is how long the investment rate environment will last and how change might affect carriers."
With respect to recent bank failures, we reached out to our domiciled insurers for any information with regard to exposure. We had two companies that were involved in Silicon Valley Bank, but the investment was inconsequential.
Inflation has had a layered effect on investments. The concern is determining how long the current investment rate environment will last and how any significant change might affect carriers. Again, the department works collaboratively with companies and analysts to monitor this.
Based on our analysis of the domestics and domiciled companies, we only have a few on the watch list, and they've been on that list for years. We know that, for the most part, they're all trending in a positive direction.
Trinidad: Our statutes provide clear guidelines for investments. Though, Delaware carriers maintain diverse investment portfolios. But we know that our insurers are constantly evaluating their investment options and looking for new and innovative investment products and approaches. The Department analysts and experts keep pace with the constantly changing investment landscape to collaborate with carriers on novel and complex investment strategies.
Trinidad: I spoke with several regulatory colleagues from different states at a convention recently, and the message from them was pretty similar: We’re just people, so reach out if you have an issue.
"Other regulators may see the relationship between the regulator
and carrier as adversarial. We don’t."
Most of the insurers domiciled in Delaware do have a good relationship with the department and know that we're firm but fair.
Other regulators may see the relationship between the regulator and carrier as adversarial. We don’t.
It's important to work together to ensure that we have a robust insurance marketplace that's able to offer innovative insurance products at an affordable cost for consumers. To do that, I try to balance the needs of consumers and consumer protection with the needs of insurance companies for financial stability and longevity.
