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Regulation and Compliance > State Regulation

ACLI Eyes NAIC Reinsurance Plan

By Arthur D. Postal

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Washington

The American Council of Life Insurers is objecting to the idea of the National Association of Insurance Commissioners serving as a national reinsurance regulator.

But the ACLI, Washington, says it likes the idea that the NAIC, Kansas City, Mo., is agreeing to the principle that federal reinsurance regulation should preempt state-level reinsurance regulation.

The NAIC is tackling reinsurance regulation in a draft of the Reinsurance Regulatory Modernization Act of 2009.

NAIC’s acknowledgment that federal preemption is necessary to reform reinsurance regulation is “welcome,” says ACLI President Frank Keating.

Reinsurance is a global business, but the U.S. regulates it on a state-by-state basis, which “leads to regulatory inefficiency and a lack of uniformity,” Keating says. “ACLI has long supported a uniform national reinsurance regulatory system and appreciates the fact that NAIC recognizes its importance.”

But the NAIC has proposed that it would serve as the national regulator, without being subject to oversight by a federal government agency.

“The NAIC is not a government agency, it is a trade association,” Keating says. “While we understand this is only a discussion draft, NAIC’s proposed methodology poses huge constitutional and governance issues that need to be addressed.”

The NAIC draft law would allow a reinsurer to conduct business nationally once the reinsurer was approved by a single state. That state, a “port of entry,” would be solely responsible for the supervision of the reinsurer.

However, the proposal would allow NAIC to establish a Reinsurance Supervision Review Board to evaluate states to determine whether they qualified as ports of entry. The board also would evaluate reinsurance regulation in foreign countries to determine whether they are eligible for recognition as “Qualified Non-U.S. Jurisdictions.”

The NAIC says the board would be controlled exclusively by NAIC and not be an agency of either the federal government or of any state government.

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