NAIC to Royce: We'll Get Back to You on "Standard-Setting"

The former commissioner said that NAIC’s new mission statement recognizes that the United States insurance industry needs a national regulatory system and that it needs a central overseer.

“But the NAIC has clearly stated that it won’t abide by the public accountability commensurate with such a role, even though it is now basically claiming that authority for itself,” the commissioner said.

“They’re putting themselves in a Catch 22,” the commissioner said. “The current situation demonstrates this perfectly, as the Congressman has nicely explained.”

The Royce letter was sent to Kevin McCarty, Florida insurance commissioner and president of the NAIC, and Dr. Terri Vaughan, NAIC CEO.

The letter was prompted by the NAIC’s decision December 19 to have its membership approve the change in designation in a conference call of all commissioners.

In his letter, Royce said he “would appreciate your prompt attention to this matter and a substantive written reply.” 

The decision to change its designation and to ask for approval of all commissioners was made soon after a public hearing on insurance modernization and regulation convened by the Treasury Department where several of those testifying referred to the NAIC as a “trade group,” which by its legal definition, it is.

Royce noted that, legally, the NAIC is a 501(c)(3) non-profit corporation.

Royce said he is writing the letter, because, “It appears, when it suits its purposes, the NAIC fends off questions about its accountability and transparency by arguing that it is ‘a private group’ that ‘does not have any regulatory authority’.

“This position is legally essential since, under controlling law, no ‘private group or association [may] regulate in the field of interstate commerce’,” Royce said.

But, Royce added, “it would now appear this ‘traditional’ position is politically inconvenient given its attempts to posture itself in the new Dodd-Frank/FIO regime.”