Dodd-Frank: NAIC Working Group Thinks About the Unthinkable

The 4 main areas of items for consideration are:

1. Examination of state receivership processes.
2. Dealing with receiverships in which an insurer is a subsidiary or affiliate of some other type of financial company.
3. The national coordination efforts needed to prepare for a giant insurer receivership.
4. Any changes in state regulations or statutes that might be needed.

In the state-level processes section, officials talk about the need for insurance regulators to have quick access to trial courts and trial court determinations, so that state regulators can take over troubled insurers within the 60-day window established by Dodd-Frank.

In the section dealing with possible changes in state statutes and regulations, officials say some states may want add a provision for systemic significance in the “hazardous condition” rule that exclaims when regulators may need to take control of a troubled insurer.

The type of emergency contemplated is “not necessarily an insolvency finding and not necessarily a liquidation,” officials note.