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.”