The National Association of Insurance Commissioners Tuesday plans to announce an initiative to brand itself as a “standard-setting organization” rather than a trade group–a designation other industry officials say the trade group does not have the legal authority to assume.

The NAIC staff and leadership is doing so by placing on its conference call agenda, among housekeeping items, a proposal for consideration by all members for the NAIC to change its official description of itself, National Underwriter has learned.

According to several regulators, demand for the change picked up steam when several participants at a recent hearing on insurance modernization and regulation convened by the Treasury Department referred to the NAIC as a “trade group,” which by its legal definition, it is.

According to one commissioner, who asked not to be named, calling the NAIC a “trade association of insurance commissioners” is sure to get an incendiary reaction from the NAIC, which is feeling threatened by a rising tide of federal insurance regulation, and by the very existence of the Federal Insurance Office (FIO).

The FIO was created through the Dodd-Frank financial services reform law and held the hearing because it is mandated by law to come up with a report by late January on its views on how the industry should be regulated going forward.

At the hearing, it was John Johns, CEO of Protective Life, who referred to the NAIC as a trade group, which drew an unequivocal response from Eleanor Kitzman, current Texas commissioner and former South Carolina commissioner.  “We are not a trade association,” Kitzman said.

Thomas Leonardi, Connecticut insurance commissioner, who also attended the hearing, corrected another witness who designated the NAIC as a trade association, by stating, “No, we are standard-setters.”

Specifically, the NAIC’s initiative to formally re-define itself, if accepted by the members, would have the NAIC call itself “the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories.”

Through the NAIC, the new definition would read, “state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S.”

Currently, the NAIC calls itself in its annual report “a private, not-for-profit organization” and registers with the IRS as a 501(C)(3) educational foundation.

In a letter to industry officials in March 2005, as part of discussions about producer activities, Andrew Beal, then NAIC general counsel, described the NAIC’s purpose as “providing its members with a national forum for discussing common issues and interests and for working cooperatively on regulatory matters that transcend the boundaries of their own jurisdiction.” Tom Considine, New Jersey insurance commissioner, defended the NAIC initiative and has also referred to the NAIC as a “standard-setting organization.”

Considine said the NAIC passes model laws and regulations, “which, although states must adopt before they are effective, nonetheless they become the regulatory standard in the ‘vernacular’ sense.”

Additionally he said, “we also adopt other instances at the NAIC, such as actuarial guidelines, that need not be adopted on a state-by-state basis and as such are standards in actuality because they have full force and effect upon their adoption by NAIC.”

But others disagreed, and said such designation would require the NAIC to have the power to pre-empt state governors, and state legislatures.

J. Robert Hunter, director of insurance for the Consumer Federation of America, and former Texas insurance commissioner as well as federal insurance administrator, titled the new description as “a rose by any other name.”

He also voiced concerned that it would generate controversy amongst governors and legislators, especially with the National Conference of Insurance Legislators (NCOIL) and the National Conference of State Legislators, which also represents state legislators.

“A name change from ‘voluntary association’ to ‘standard-setter’ would not mean anything,” Hunter said. He said of the NAIC that calling it a trade organization undermines the group, “and exposes them, they think, to more aggressive federal posturing and maybe action.”

Kevin McKechnie, executive director of the American Bankers Insurance Association, insisted that the NAIC has no ability to set standards since none of its members can either write laws or enforce laws in other jurisdictions.

He said that this is why “I’m a little surprised at their new effort at self-promotion,” McKetchnie said. “It would be one thing if the NAIC could create a model law and enforce it nation-wide; they seem to think they can. But, they have a more than two century-long record of failing to do so.”

See the NAIC proposed statement below. The NAIC will vote at an Executive/Plenary meeting on Dec. 2oth in a late afternon (5pm ET) conference call:

Description of the NAIC The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S.

Postcript: The statement was adopted by the Plenary Dec. 20, as expected, after Voss spoke, saying the NAIC needs to counter the statements that the NAIC is a trade association, which she said are misleading.