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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
insurance;
modeling organizations; predictive models
(NOW: insurance; modeling and data organizations)
Purpose
Renames advisory organizations as model and data organizations and applies the advisory organizations statutory authorities and requirements to model and data organizations. Removes the authority of the Director of the Department of Insurance and Financial Institutions (DIFI) to examine these organizations.
Background
The Director of DIFI (Director) may require each property and casualty insurer in Arizona to report its loss and expense experience, investment income, administrative expenses and other data. DIFI may designate one or more rate service organizations or advisory organizations to gather and compile the experience and data (A.R.S. § 20-235).
An advisory organization is any person other than a single insurer who assists two or more insurers or rate service organizations in the making of rates by compiling and furnishing loss or expense statistics or other statistical information and data or by the submission of recommendations as to rates, forms or supplementary rate information and does not include a joint underwriting association, any actuarial or legal consultant, any employee of an insurer or insurers under common control or management or their employees or manager (A.R.S. § 20-381).
Statute prescribes the following information that must be filed with the Director before an advisory organization may operate in Arizona: 1) a copy of its constitution, articles of agreement or association or certificate of incorporation and a copy of its bylaws, rules and regulations; 2) a list of its members; and 3) the name and address of an Arizona resident upon whom notices or orders of the Director or process affecting the advisory organization may be served. An advisory organization must also file with the Director an agreement allowing the Director to examine the advisory organization. The Director may examine each advisory organization. Statute prohibits an insurer or rating organization from supporting its filings by statistics or adopting rate making recommendations from an advisory organization that has not filed the statutorily prescribed information with the Director. If the Director finds the insurer or rating organization to be in violation of the prohibition, the Director may issue an order requiring the discontinuance of the violation (A.R.S. §§ 20-368; 20-370; and 20-390).
Statute governing insurance rates and rate making promotes the public welfare by regulating insurance rates to not be excessive, inadequate or unfairly discriminatory and to authorize and regulate cooperative action among insurers in rate making. Where the rules and regulations of a rating bureau or advisory organization conflict with the law, the rules and regulations do not apply (A.R.S. § 20-341).
Statute allows an insurer to establish rates and supplementary rate information based on statutory factors using, the recommendations of an advisory organization. Licensed rate service organizations, advisory organizations and admitted insurers may exchange information and experience data with rate service organizations, advisory organizations and insurers in Arizona and other states and may consult with the specified organizations with respect to rate making (A.R.S. § 20-387).
Laws 2021, Chapter 357 adopted the National Association of Insurance Commissioners Reinsurance Act (NAIC Reinsurance Act) which repealed and replaced insurer requirements relating to credit for reinsurance and reinsurance agreements (NAIC).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Renames an advisory organization as a modeling and data organization and applies the advisory organization statutory authorities and requirements to model and data organizations.
2. Removes the requirement for a modeling and data organization to file an agreement with the Director stating that the Director may examine the organization in accordance with regulations regarding rating organization examinations.
3. Removes the Director's authority to make or cause to be made an examination on modeling and data organizations.
4. Allows a modeling and data organization to file models with the Director to be used by insurers in Arizona for making rates.
5. Allows the Director to require a modeling and data organization to file supporting data or any additional information related to the content of the model and the outputs of the model necessary to verify that the model complies with statutory insurance requirements.
6. Specifies that any models, supporting data or additional information requested by the Director and model outputs filed by modeling and data organizations are confidential and not subject to subpoena or public records requirements.
7. Specifies that the regulations of modeling and data organizations do not preclude a modeling and data organization from filing a model with the Director to be used by insurers in Arizona for making rates.
8. Updates the NAIC Reinsurance Act to clarify the exemption from rules relating to certain reinsurance arrangements.
9. Makes technical and conforming changes.
10. Becomes effective on the general effective date.
House Action
COM 2/10/26 DPA/SE 10-0-0-1
3rd Read 2/24/26 34-22-4
Prepared by Senate Research
March 12, 2026
MG/SJ/hk