Insights: Article

What's in NAIC's Data Security Model Law

By   Michael Nadeau

February 05, 2018

Big Data Concept

The recent development and adoption of a model law to address cyber security risks and requirements was a multi-year road for the National Association of Insurance Commissioners (NAIC). (See timeline below). The new Model Law closely resembles the New York Department of Financial Services Cybersecurity Requirements for Financial Services Companies regulation that took effect on March 1, 2017. It prescribes a security program based on a risk assessment appropriate to the size and complexity of the insurance company and places the responsibility for an adequate program with the company’s board. The Model Law will likely be adopted in some form in most states and provide a national approach to cyber security for the insurance industry.

Key Requirements under the Model Law
The Model Law contains the following key sections:

The Model Law applies to a “licensee” pursuant to the insurance laws of [the state]. It does not apply to certain purchasing or risk retention groups chartered and licensed in other states or a licensee that is acting as an assuming insurer that is domiciled in another state or jurisdiction.

A cyber security event is defined as “an event resulting in unauthorized access to, disruption or misuse of, an information system or information stored on such information system.” Encrypted nonpublic information is excluded if the encryption, process or key is not also acquired, released or used without authorization. Nonpublic information accessed by an unauthorized person that has not been used or released and has been returned or destroyed is also excluded.


  • Each applicable licensee will be required to develop, implement and maintain a comprehensive written Information Security Program. The program will be based on a risk assessment and describe the administrative, technical, and physical safeguards for the protection of nonpublic information and the licensee’s information system. It should be commensurate with the size and complexity of the licensee and the nature and scope of the licensee’s activities. This includes the use of third-party service providers and the sensitivity of the nonpublic information used by or in the possession of the licensee.
  • A licensee is to establish a written incident response plan. The plan is to describe how the licensee will respond to and recover from a cyber security event.
  • Each insurer domiciled in [the state] will be required to submit a written statement to the commissioner annually certifying that the insurer is in compliance with the requirements set forth the act. Each insurer is to maintain all records, schedules and data supporting the certificates for a period of five years.
  • Each licensee must promptly investigate a cyber security event. This includes events that have or may have occurred and applies to vendors and service providers designated to act on behalf of the licensee.
  • If a cyber security event has occurred, there are provisions for notification to the commissioner(s), consumers and producers of record. It also contains notice provisions for cyber security events of third-party service providers and of reinsurers to insurers.

The Model Law also includes exceptions to the Model Law, commissioner(s) enforcement powers and confidentiality protections to protect certain information that is provided to an insurance regulatory body pursuant to the Model Law or as a result of an investigation or examination pursuant to the Model Law.

For more information or to obtain a copy of the Insurance Data Security Model Law, visit the NAIC Website. Learn more about cyber security here.

The NAIC Journey to the Model Law