Insurance regulators have denied a request from the life insurance industry to relax capital and surplus requirements. The National Association of Insurance Commissioners reached the decision yesterday during a meeting after spending three months weighing the proposal.
"So far the insurance industry is in much better condition than most of the rest of the financial services sector because of strong state solvency regulations," said NAIC President and New Hampshire Insurance Commissioner Roger Sevigny. "Simply put, the industry has not made a credible case for why we need to make changes on an emergency basis, and why those changes should be limited to the specific proposals made by the industry."
According to a statement released by the NAIC, during a four-hour public hearing held Jan. 27, regulators took comments from industry representatives, consumer groups and other interested parties on the industry's nine proposals.
Following the hearing, members of the NAIC Capital and Surplus Working Group recommended the rejection of three proposals, and the approval of variations of six other proposals impacting reserving requirements, reinsurance collateral and accounting procedures.
In reaction to the NAIC's decision, the American Council of Life Insurers (ACLI) President and CEO Frank Keating issued the following statement:
""The American Council of Life Insurers is disappointed with the failure of the NAIC to provide uniform guidance to the states on how to respond to rapidly changing and volatile economic conditions. In absence of this uniform guidance, the responsibility to respond to these unprecedented economic conditions now falls to individual states.
"It's important to note that today's decision by the NAIC in no way affects life insurers' ability to pay claims. To date, the industry's capital and reserve levels have weathered the financial turmoil currently gripping our nation and life insurers remain well-positioned to meet their obligations to policyholders.
"However, no one knows when this current market turmoil will end or what effect it ultimately will have on our economy. Adoption of the proposal would have provided a financial cushion and operational flexibility during these turbulent times. It also would have provided more accurate information to the public on the industry's ability to withstand any further potential downturn in the economy and given consumers what they need to make informed decisions about their financial futures."