Washington, DC, is poised to overhaul its insurance holding company regulations with new legislation set to take effect imminently.
The Holding Company System Amendment Act of 2026, designated as B26-0426 and introduced by Council Chairman Phil Mendelson, is set to be enacted without the Mayor's signature on April 29, 2026, receiving Act Number A26-0301.
The legislation amends the District's Holding Company System Act of 1993 to align it with national standards developed by the National Association of Insurance Commissioners. Once enacted, it must still clear a 30-day congressional review period under the D.C. Home Rule Act before taking effect.
At its core, the legislation will impose two new compliance obligations on insurance holding company systems operating under DC regulatory oversight.
The first is an annual group capital calculation. The ultimate controlling person of every insurer subject to registration under the act will be required to concurrently file with its registration an annual group capital calculation as directed by the lead state commissioner.
The report must be completed in accordance with the NAIC's group capital calculation instructions and filed following procedures set out in the NAIC Financial Analysis Handbook. The NAIC instructions may permit the lead state commissioner to allow a controlling person other than the ultimate controlling person to file the calculation.
The second is a liquidity stress test. The ultimate controlling person of every insurer that is both subject to registration and scoped into the NAIC liquidity stress test framework will be required to file the results of a specific year's liquidity stress test with the lead state commissioner. The test must comply with the NAIC framework's instructions and reporting templates for the applicable year.
The scoping mechanism works on a threshold basis. If an insurer meets at least one of the designated exposure benchmarks set by the NAIC for a given data year, it is considered scoped in. If it does not meet any threshold, it is scoped out.
In both cases, the lead state commissioner, working in consultation with the NAIC Financial Stability Task Force, retains discretion to override the default determination. When the District serves as the lead state, it must also evaluate concerns about insurers being scoped in and out of the framework on a frequent basis. Any changes to the framework or scope criteria data year take effect on January 1 of the year following adoption.
Not every holding company system will face the same requirements. The act provides four categories of exemptions from the group capital calculation.
The first covers a holding company system with a single insurer that only writes business, is licensed only in its domestic state, and assumes no business from other insurers. The second exempts systems already required to perform a group capital calculation by the Federal Reserve Board, though that exemption falls away if the Fed refuses or is unable to share its calculation with the lead state commissioner.
The third covers holding companies whose non-U.S. group-wide supervisor is located in a reciprocal jurisdiction that recognizes the U.S. state regulatory approach to group supervision and group capital. The fourth applies to systems that provide information meeting NAIC accreditation requirements to the lead state and whose non-U.S. group-wide supervisor, outside a reciprocal jurisdiction, recognizes and accepts the group capital calculation as the worldwide group capital assessment for U.S. insurance groups operating in that jurisdiction.
Even where an exemption applies, the lead state commissioner retains authority to require the group capital calculation for U.S. operations of any non-U.S.-based insurance holding company system where it is deemed appropriate for prudential oversight, solvency monitoring, or ensuring the competitiveness of the insurance marketplace.
The act also sets a specific materiality threshold for transactions falling under the group capital and liquidity stress test requirements. Sales, purchases, exchanges, loans or extensions of credit, investments, or guarantees involving one-half of one percent or less of an insurer's admitted assets as of December 31 will be considered material for these purposes.
Beyond capital and liquidity, the legislation addresses what happens when an insurer runs into financial trouble. If the Commissioner determines that an insurer is in a hazardous financial condition, or in a condition that would be grounds for supervision, conservation, or a delinquency proceeding, the Commissioner may require the insurer to secure and maintain either a deposit held by the Commissioner or a bond, with the choice left to the insurer.
The Commissioner sets the amount, which may not exceed the value of the insurer's contractual obligations or agreements in any one year, and may apply the requirement to a single contract, multiple contracts, or a contract with a specific person or persons. In making this determination, the Commissioner may consider whether concerns exist regarding the affiliated person's ability to fulfill the insurer's contractual obligations if the insurer were placed into liquidation.
One of the more operationally significant provisions deals with insurer data held by affiliates. The act establishes that all records and data of the insurer held by an affiliate are and remain the property of the insurer, subject to the insurer's control. They must be identifiable and segregated, or readily capable of segregation at no additional cost, from all other persons' records and data. This covers claims and claim files, policyholder lists, application files, litigation files, premium records, rate books, underwriting manuals, personnel records, financial records, and similar records in the affiliate's possession, custody, or control.
At the insurer's request, the affiliate must ensure that a receiver can obtain a complete set of all records pertaining to the insurer's business, gain access to the operating systems on which the data is maintained, obtain the software running those systems either through assumption of licensing agreements or otherwise, and restrict the affiliate's use of the data if it is not operating the insurer's business. The affiliate must also provide a waiver of any landlord lien or other encumbrance to preserve the insurer's access to records and data in the event of the affiliate's default under a lease or other agreement.
Premiums or other funds belonging to the insurer that are collected by or held by an affiliate are designated as the exclusive property of the insurer and subject to its control. Any right of offset in the event of receivership will be subject to the District's Insurers Rehabilitation Act of 1993.
The act also extends regulatory reach over affiliates providing essential services. Any affiliate party to an agreement or contract with a domestic insurer to perform services that are an integral part of the insurer's operations – including management, administrative, accounting, data processing, marketing, underwriting, claims handling, investment, or similar functions – or essential to the insurer's ability to fulfill its obligations under insurance policies, will be subject to the jurisdiction of any supervision, seizure, conservatorship, or receivership proceedings against the insurer. The Commissioner may require that such service agreements include the affiliate's explicit consent to this jurisdiction.
Confidentiality protections for the new filings are extensive. The group capital calculation, the group capital ratio produced within it, and any group capital information received from a holding company supervised by the Federal Reserve Board or any US group-wide supervisor must be kept confidential. The same applies to liquidity stress test results, supporting disclosures, and any liquidity stress test information received from holding companies supervised by the Federal Reserve Board and non-US group-wide supervisors.
The Commissioner may share this information with other state, federal, and international regulators, the NAIC, designated third-party consultants, and law enforcement, but only under written agreements that preserve confidentiality and verify the recipient's legal authority to maintain it. Ownership of shared information remains with the Commissioner. With the exception of materials reported under the liquidity stress test provisions, the NAIC and third-party consultants are prohibited from storing shared information in a permanent database after the underlying analysis is completed. For liquidity stress test reporting involving a third-party consultant, the agreement must provide for notification of the consultant's identity to the applicable insurers.
The act rounds out with a broad prohibition on the public dissemination of group capital calculations, group capital ratios, liquidity stress test results, and supporting disclosures. No insurer, broker, or other person engaged in any manner in the insurance business may publish, circulate, or broadcast any representation about these figures through any medium. The only exception is narrow: if a materially false statement about these figures is published and the insurer demonstrates its falsity to the Commissioner with substantial proof, the insurer may publish an announcement whose sole purpose is to rebut the false or misleading statement.
Once enacted on April 29, the act will enter its 30-day congressional review window. If Congress does not act to block it, the Holding Company System Amendment Act of 2026 will become law, marking one of the District's most significant updates to its insurance holding company supervision framework in over three decades.
