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Consumer Reps Expand Capital Proposal Battle

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Consumer advocates are writing to state attorneys general and governors about what they say is lack of access to meetings at the National Association of Insurance Commissioners.

The Consumer Federation of America, Washington, and the Center for Economic Justice, Austin, Texas, sent letters Dec. 31, 2008, to the attorney generals and governors of Connecticut, Delaware, Maine, Iowa, Kansas, New Hampshire, New Jersey, New York, Virginia, West Virginia and Wisconsin.

The CFA and the CEF also sent letters to the attorney general and top official in the District of Columbia.

The jurisdictions targeted have representative regulators sitting on the Capital & Surplus Working Group at the National Association of Insurance Commissioners, Kansas City, Mo.

The groups say they are responding to a closed meeting that the working group held Dec. 29, 2008, to discuss a capital and surplus proposal submitted to the NAIC by the American Council of Life Insurers, Washington, in November 2008.

The groups have criticized what they say is a lack of information about the proposal available to the public and to state regulators.

The groups also are asking for more information about the potential impact of the proposed actuarial and accounting changes.

The ACLI says the changes are necessary to bring capital and surplus relief to life insurers. It estimates that implementing the 9-point proposal could improve the life industry’s capital and surplus position by $9.6 billion and about $16 billion.

The NAIC plans to hold a public working group hearing on the proposal Jan. 27 in Washington.

CFA/CEJ representatives ask in their letter that attorneys general examine whether the NAIC “trade association” has been used to “to circumvent open meeting, open record and administrative procedure laws.”

The letter is signed by Robert Hunter, director of insurance at the CFA, and by Birny Birnbaum, executive director of the CEJ.

The groups have received a response from the New Hampshire attorney general’s office and from Maine Superintendent Mila Kofman, Birnbaum says.

New Hampshire is the home state of Roger Sevigny, the president of the NAIC.

New Hampshire Deputy Attorney General Bud Fitch has acknowledged receiving the CFA/CEJ letter but writes that, under the state’s open meeting law, the New Hampshire Superior Court has sole jurisdiction over alleged open meeting law violations.

The attorney general’s office has no role in investigating or prosecuting alleged violations, Fitch writes.

Kofman writes that she has received a copy of the letter sent to the outgoing Maine attorney general, Steven Rowe.

“I share your objections to the Working Group’s decision to close [the Dec. 29] conference call to the public, and I strongly urged the Working Group to have an open call allowing stakeholders and members of the public to hear concerns raised and learn how each state would vote on the specifics,” Kofman writes.

“The objections I have raised influenced the decision to hold a public hearing before taking any final action,” Kofman writes.

Kofman also writes that regulators should avoid regulatory actions that will show that carriers are in a less-than-healthy financial light when, in fact, they are very healthy companies.

“We should be trying to find a balance and help carriers without hurting consumers,” Kofman writes. “I have emphasized that the challenge is how to strike that balance and make sure we are not hurting consumers…. Now, more than ever, we need realistic, accurate financial evaluations. We should be extremely skeptical about making any change now that we would not be just as willing to make in better financial times. And we should make sure that the changes benefit policyholders (not Wall Street).

“When it comes to solvency, regulators should consider changes if there is solid and convincing evidence to demonstrate that some current accounting conventions and capital requirements are duplicative or treat unrealistic worst-case scenarios as likely. The case has not been made to justify such fundamental changes, affecting a multi-billion dollar industry and millions of consumers.”

Kofman also writes that she is “deeply troubled” that expert analysis of technical actuarial and accounting working groups “has been disregarded after it failed to provide enough improvement to insurers’ RBC [risk-based capital] ratios.”

“Quick action with long lasting impact on the market should not trump the need for sufficient analysis to determine the full implications of the proposed changes using a deliberative, open process for such fundamental and important issues,” Kofman writes.

In an interview with CEJ’s Birnbaum, he says that “on this particular issue, it is clear that not only was more public vetting needed but also more information needed to be given to members.

“As a general rule, too many things are discussed out of the public view.”

In response to a request for comment from Sevigny, an NAIC representative said interested parties should read the NAIC’s open meetings policy.