Insurance News

Insurance Regulators Besiege Congress To Defend State Regulation

Posted on: May 26, 2009

Dozens of state insurance regulators have descended on Congress, to urge that any federal insurance regulatory reforms should keep in place and build on the existing state-based regulation model.

The nation’s state-based regulatory system, the regulators said in a statement, “has remained a constant in an otherwise erratic economic climate.”

Joining the National Association of Insurance Commissioners pilgrimage to Capitol Hill today and yesterday, for talks on insurance regulatory reform with key members of Congress, was NAIC Chief Executive Officer Therese M. Vaughan.

NAIC president and New Hampshire Insurance Commissioner Roger Sevigny said while regulatory reforms are needed—possibly even some sort of federal role—the current state-based system is strong and should not be supplanted by a “new federal bureaucracy.” Instead, federal involvement should “streamline the strong state-based regulatory framework,” he said.

As a whole, Mr. Sevigny noted, the business of insurance has not posed systemic risk to the nation’s economy, and has instead provided a source of relative calm in an otherwise turbulent time.

Ms. Vaughan said reform proposals must ensure consumers have accountable and local regulators who can provide continued stability despite these challenging economic times. “Any reform framework must integrate, but not displace our current state-based system of insurance regulation,” she said.

Neil Alldredge, vice president of state and regulatory affairs for the National Association of Mutual Insurance Companies (NAMIC), said the meetings are a positive step, with the NAIC is engaging in serious discussion with Congress.

He said he could not recall such an en masse effort by regulators to get as many representatives as possible to Washington. “It’s noteworthy in and of itself that they’re doing this,” Mr. Alldredge said.

More than 35 regulators were said to be part of the visit to Congress.

He said the regulators’ message is mostly consistent with NAMIC’s regarding the preservation of the state-based system.

Mr. Alldredge did express some concern that the NAIC seemed to be saying Washington can have a role, as long as it does not infringe on the state regulators. Mr. Alldredge said such an attitude could lead to dual regulation, which he called the worst possible outcome.

But that risk is outweighed for the moment by the benefit of having state regulators organize and engage Congress on the benefits of the state-based regulatory system.

Blain Rethmeier, spokesman for the American Insurance Association (AIA) disagreed with the NAIC’s arguments, and renewed AIA’s call for federal involvement in regulation.

He said, “The state regulatory structure is limited and ill-equipped to coordinate with other financial regulators in the U.S. and abroad. Its fragmented and local nature has been both an impediment to progress and innovation, and to some extent a liability in managing the current crisis.”

Mr. Rethmeier added, “establishing a centralized, national insurance regulator focused on core consumer protections and the safety and soundness of nationally chartered insurers would ensure that the U.S. insurance industry will be effectively regulated and a competitive force well into the future.”

© Copyright 2009 National Underwriter Property & Casualty. A Summit Business Media publication. All Rights Reserved.

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