Puerto Rico has overhauled its insurance‑sector regulatory framework with the signing of Law 111‑2026, a measure that imposes new financial‑reporting obligations on insurance companies, expands the supervisory powers of the Office of the Commissioner of Insurance (OCS), and shields key regulatory filings from public disclosure.
Governor Jenniffer González Colón signed the legislation this week, positioning the island to maintain its accreditation with the National Association of Insurance Commissioners (NAIC) and to strengthen oversight of increasingly complex insurance group structures.
The law updates Chapter 44 of the Insurance Code to incorporate the NAIC’s most recent amendments to its Insurance Holding Company System Regulatory Act, a model statute adopted by most U.S. jurisdictions. Puerto Rico first aligned its framework with the NAIC model in 2012, but regulators argued that the rapid evolution of corporate structures, capital flows, and liquidity risks required a new set of tools.
“With this legislation, we continue strengthening our regulatory system to guarantee the stability of the insurance market and protect Puerto Rican consumers,” the governor said in a statement.
New obligations for insurance groups
Law 111‑2026 imposes several new reporting requirements on the “person who exercises ultimate control” of an insurer domiciled in Puerto Rico. These include an annual enterprise risk report that must identify any significant risks within the holding‑company system that, “if not remedied in a timely manner, would likely have an adverse effect on the financial condition or liquidity of the insurer,” according to the statute.
The law also mandates the annual submission of a Group Capital Calculation (GCC), a standardized assessment of the capital adequacy of the entire insurance group. The GCC must be completed in accordance with the NAIC’s instructions and submitted to the group’s designated “lead state” regulator. While the law outlines several exemptions — such as for groups supervised by the U.S. Federal Reserve or foreign supervisors in reciprocal jurisdictions — it also grants the lead state commissioner broad discretion to require the GCC even when an exemption might otherwise apply.
In addition, insurance groups that meet NAIC‑defined thresholds must undergo Liquidity Stress Tests (LST). These tests evaluate whether a group could withstand severe liquidity shocks. The law incorporates the NAIC’s annual review of “scope criteria,” noting that insurers meeting at least one threshold are considered in scope unless the lead state determines otherwise. Regulators are instructed to avoid frequent shifts in inclusion or exclusion, reflecting concerns about regulatory consistency.
Expanded oversight powers for the Insurance Commissioner
The law significantly strengthens the authority of the OCS to intervene when an insurer shows signs of financial distress. If the Commissioner determines that an insurer is in an “adverse financial condition,” as defined in Rule 94, the agency may require the insurer to post a deposit or bond to protect policyholders during the duration of any contract with an affiliate. The amount may not exceed the value of the contract for a given year, but the Commissioner has discretion to determine whether the requirement applies to one or multiple agreements.
The statute also reinforces the Commissioner’s authority over affiliates that perform essential functions for an insurer — including underwriting, claims processing, accounting, data management, and investment operations. Affiliates must maintain records in a manner that allows the insurer or a court-appointed receiver to access complete files, systems, and software at no additional cost. The law explicitly states that all records held by affiliates “are and shall remain the property of the insurer,” ensuring regulators can seize and review them during supervision, rehabilitation, or liquidation proceedings.
These provisions reflect NAIC guidance intended to prevent operational disruptions if an insurer enters receivership and to ensure regulators can quickly obtain the information needed to assess solvency.
Confidentiality provisions that limit public scrutiny
One of the most consequential — and controversial — aspects of Law 111‑2026 is its expansion of confidentiality protections. The law declares that all documents submitted under Articles 44.030, 44.050, and 44.060 “shall be recognized as proprietary and containing trade secrets and shall be considered confidential and privileged.” This includes enterprise risk reports, group capital calculations, liquidity stress test results, and any related disclosures.
The statute further specifies that the Commissioner “shall maintain the confidentiality of the group capital calculation and the group capital ratio” and must also keep confidential “the results of the liquidity stress test and the supporting disclosures.” These materials are not subject to public inspection and cannot be admitted as evidence in civil proceedings, except under limited circumstances.
At the same time, the law authorizes the Commissioner to share confidential information with other state, federal, and international regulators — including the NAIC — provided those entities agree in writing to maintain confidentiality. This dual structure reflects the NAIC’s emphasis on regulatory collaboration while limiting public access to sensitive financial data.
A move to preserve NAIC accreditation and strengthen market stability
The NAIC requires accredited jurisdictions to adopt its model laws and maintain consistent solvency‑oversight practices. Puerto Rico’s adoption of the updated model is therefore essential to preserving its accreditation, which ensures that insurers domiciled on the island are recognized as operating under robust regulatory standards.
The law’s preamble underscores this point, noting that the GCC and LST frameworks allow regulators to “identify early signs of financial risk and adopt timely corrective measures.” Regulators argue that these tools are critical for protecting consumers and maintaining market stability, particularly as insurance groups become more complex and interconnected.
For insurance holding companies, the new requirements will increase compliance obligations and may necessitate significant adjustments to reporting systems, data management, and internal risk assessment processes. But industry observers note that alignment with NAIC standards is necessary for Puerto Rico to remain competitive and integrated within the broader U.S. insurance regulatory system.
With Law 111‑2026 now in effect, Puerto Rico has taken a major step toward modernizing its solvency‑oversight framework, expanding the powers of its insurance regulator, and tightening confidentiality around key financial disclosures — a combination that is likely to reshape the regulatory landscape for insurers operating on the island.
