The leader of the National Association of Insurance Commissioners says commissioners have concerns about the “basic structure” of the proposed State Modernization and Regulatory Transparency Act.[@@]
Diane Koken, president of the NAIC, Kansas City, and Pennsylvania insurance commissioner, discusses the concerns in a March 18 letter sent on NAIC stationery to Reps. Michael Oxley, R-Ohio, chairman of the House Financial Services Committee, and Richard Baker, R-La., chairman of the Financial Services Committee’s Capitals Markets Subcommittee. Koken signed the letter in her capacity as president of the NAIC.
The SMART Act “is not a concept that NAIC would suggest to Congress,” Koken writes in the March 18 letter. “Our concerns are deeply rooted in the basic structure of the SMART Act that mandates federal preemption of state laws and regulations, federal supervision of state regulation, and complete rate de-regulation for all states. We do not believe that tweaking the language of the SMART Act discussion draft can resolve these basic conflicts.”
An industry official who has seen the letter says the Financial Services Committee leadership and staff are concerned about the Koken letter because “it negatively critiques SMART. It doesn’t seem they want to engage in this process in a positive way.”
Committee leaders also are complaining, according to several sources, about a summary paragraph which says a committee of state regulatory agency staffers and commissioners has conducted an intense analysis of SMART drafts provided by the committee’s Republican staff.
“Although the NAIC’s SMART Act review teams were not tasked with reaching policy decisions, their factual findings reveal fundamental problems for preserving essential state regulatory authority if the basic elements of the draft SMART Act bill become federal law,” Koken writes in the March 18 letter.
Several copies of the letter were acquired by National Underwriter from industry sources representing both the life and property-casualty sides of the business. With Congress in recess, no members of the panel’s leadership team were available for comment, and committee staffers did not return telephone calls.
But 3 of the people interviewed who were familiar with Koken’s letter said the committee’s leadership and staff regarded the letter as “negative.”
One industry official said the letter could result in the NAIC playing a smaller role in the drafting of the bill than Oxley had envisioned when he first unveiled plans for the act in April.
“I think the NAIC is making a huge mistake,” the industry official said. “They are under the misapprehension that reform in the state capitals is an option that federal legislators are looking at, and it isn’t. There will be federal legislation on this topic; and Congress is just beyond conducting oversight.”