Iowa Insurance Commissioner Susan Voss, the immediate past president of the NAIC, will kick off a regulatory reform summit Wednesday in Washington, at which Rep. Ed Royce, R-Calif., will follow with luncheon remarks anticipated to address the status of the NAIC as an organization.
To date, the NAIC has not yet responded to a Feb. 28 letter to the NAIC from Rep. Royce, a senior member of the House Financial Services Committee who asked the NAIC to precisely define what it is and how it is governed. Royce has been a longtime champion of an optional federal charter for insurers. It is expected to soon.
Royce will appear at the Networks Financial Institute’s insurance reform summit entitled, “An Era of Enhanced Federal Scrutiny March 21.
Royce said he was asking for the information “as a means of reconciling the NAIC’s own inherently inconsistent statements about itself.”
After the NAIC conference in New Orleans earlier this month concluded the first week in March, NAIC CEO Dr. Terri Vaughan noted that everyone had been busy with the intensive tri-annual meeting and work had not yet begun to respond. However, a draft has said to have been completed.
The Royce letter was addressed to Kevin McCarty, Florida insurance commissioner and president of the NAIC, and Vaughan. Recent inquiries on the status of a response were not immediately answered.
The letter was prompted by the NAIC’s decision Dec. 19, 2011 to have its membership approve the change in designation in a conference call of all commissioners.
In his letter, Royce told the NAIC officials he “would appreciate your prompt attention to this matter and a substantive written reply.”
Although hitting ‘Send’ on the NAIC’s 2011 annual report, “The Home of Insurance Regulation,” where analogies to parts of a house, including to the wiring and plumbing, are made with respect to insurance regulation might do the trick in some cases, it won’t for Royce. The question is more politically fraught due to the relationship between the NAIC and federal entities at a time of flux in the international and federal insurance supervisory arenas.
The decision to change the NAIC’s description to “standard-setter” had been in the works for awhile, but was made public soon after a hearing on insurance modernization and regulation convened by the Treasury Department’s Federal Insurance Office (FIO) where a panel member testifying referred to the NAIC as a “trade group,” which Connecticut Insurance Commissioner Tom Leonardi countered.
“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,’” Royce stated in his letter.
But the NAIC’s annual report’s home analogy might be instructive. “Just as a thermostat regulates a home’s heating and cooling system, insurance regulators recognize the importance of monitoring companies’ conduct in a more uniform manner,” the NAIC states in the market regulation portion of its annual report.
In the government relations section, state-based insurance regulation is seemingly compared to the foundation of a house: “When strong winds blow, the very foundation of a home is tested. No storm has challenged the strength of our regulatory framework in recent years as much as the financial crisis that peaked in the fall of 2008. While state-based insurance regulation protected the insurance markets from the worst damage, state regulators are making proactive changes to better monitor financial markets, address the insurance industry’s exposure to other economic sector vulnerabilities and ensure that sound regulation will support the insurance industry in the United States and abroad going forward,” the report states.
Structural upgrades to the house take the form of the Solvency Modernization Initiative (SMI) to perform “a holistic, critical self-examination of the U.S. solvency regulation framework, supplementing the ongoing maintenance of solvency rules and processes.”
Other speakers will include four insurance trade group presidents, two academics, and two speakers from Ernst & Young on international regulatory harmonization.
The financial health and solvency of insurance companies is the ground below the house, “keepsakes from our travels to remind us of the adventures we had and the people we met” when one journeys abroad from the home take the form “enhanced regulatory cooperation, memoranda of understanding and technical exchanges. “
FIO Director Michael McRaith, who was slated to be the keynote speaker, will not be able to appear due to the fact that the FIO report mandated by the Dodd-Frank Act has not yet been released, the conference organizer noted. The report will be the elephant in the room if it is not addressed.
Royce appears to have been added to the agenda recently, perhaps to replace McRaith.
Other speakers, including Roy Woodall of the Financial Stability Oversight Council, where he is the only voting member with insurance expertise, will discuss issues, legislation and research affecting the insurance industry, including elements of the Dodd-Frank Wall Street Reform and Consumer Protection Act which created the FIO, the agenda says.
The summit is sponsored by Faegre Baker Daniels, with additional support from Ernst & Young.