The National Association of Insurance Commissioners continues to oppose federal standards for state insurance regulation, but several former regulators have different ideas.[@@]
The former regulators agreed on the need for a mechanism that could increase uniformity in insurance regulation here at a hearing organized by the Capital Markets Subcommittee of the House Financial Services Committee.
Several of the 5 regulators who testified at the hearing also took issue with the NAIC’s analysis of a draft of the proposed State Modernization and Regulatory Transparency Act.
The staff of the House Financial Services Committee is drafting the SMART Act.
The NAIC, Kansas City, Mo., says provisions in the current draft of the act that could lead to preemption of state authority would be bad both for insurers and for their customers.”
But the preemption provisions in the proposed bill are only a “last resort,” former Ohio Insurance Commissioner Lee Covington, who supports the idea of coming with a mechanism for increasing uniformity, said at the hearing.
Rep. Paul Kanjorski, D-Pa., ranking minority member of the subcommittee, used the hearing to drum up support for an optional federal charter, or OFC, especially for life insurance companies.
An OFC system could give insurers a chance to choose between state regulation and federal regulation.
“Rather than overlaying a federal bureaucracy on top of state regulation, an OFC would, in my view, create a sensible, separate and streamlined regulatory system,” Kanjorski said.
“The consensus for creating such a charter continues to grow,” Kanjorski said. “The dual oversight has worked well for banking. Moreover, because of its standardized products and nationwide marketplace, the life insurance industry, from my perspective, is particularly ready for the adoption of an OFC.”
Although the 5 former commissioners who testified all agreed on the need for some form of federal action, Diane Koken, Pennsylvania commissioner and president of the NAIC, was steadfast in opposition to the bill.
“The states believe it is constructive to point out basic constitutional, legal, and operational problems that would undermine the SMART Act’s stated purposes,” Koken said.
“The draft SMART Act incorporates unacceptable levels of federal preemption that would create both legal and practical problems for the insurance industry and its customers,” Koken testified.