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Regulation and Compliance > Federal Regulation

NAIC takes low-key approach on federal regulation

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The National Association of Insurance Commissioners takes a subdued, fact-based approach in its comments on how federal agencies should provide consolidated regulation of insurance companies which operate savings and loans.

The comment letter responds to specific questions asked by federal regulators regarding separate accounts, the general treatment of insurance underwriting, surplus notes and policy loans.

The letter also offers comparison information on the substantive differences between generally accepted accounting principles and the statutory accounting principles used by state regulators to evaluate the financial health of insurance companies.

The letter said the specific information might be useful to federal regulators in gaining a “better understanding the relative conservative nature of SAP” and the risk-based capital process used by state regulators to evaluate the health of insurance companies.

“We hope these comments and the appended information will be helpful as further consideration is given to more suitable standards for insurance enterprises with thrifts and banking entities,” the letter says.

It adds that the NAIC’s “technical experts stand ready to answer additional questions in person or by telephone.”

The letter was signed by Therese Vaughn, NAIC retiring CEO, and Kevin McCarty, Florida insurance commissioner and current NAIC president.

“We are confident once a better understanding of the existing financial standards required of such insurers is reached, more progress can be made toward developing a regulatory approach that captures the complete risk profile of an insurance enterprise,” the letter said.

The regulators are asking for comment on the metrics they will use in providing consolidated regulation of insurance companies which operate savings and loan holding companies.

Provisions of the Dodd-Frank financial services reform law mandate that the Federal Reserve Board and the Office of the Comptroller of the Currency assume oversight of savings and loans that were formerly the responsibility of the Office of Thrift Supervision, which has been phased out.

Under the law, the Fed is replacing the OTS as the consolidated regulator of thrift holding companies formerly overseen by the OTS.

But, they are chartered by the Office of the Comptroller of the Currency.

The 62-page NAIC comment letter includes an appendix that lists the outstanding surplus notes of all property and casualty, life, fraternal, title and health insurance companies chartered by the states.

The data provided to federal regulators indicated that the policyholder surplus for the entire industry was $1.2 trillion and that 4.3 percent of this, or $51.5 billion, is being held in surplus notes.

It even talks about the financial health of eight insolvent insurance companies.

These include PMI Mortgage Insurance Co., based in Arizona, which has negative capital of more than $2 billion. Three health companies are listed as insolvent, one in Florida, one in New York and another in Guam. A risk-retention group formed by the scaffold industry in Washington, D.C. is also listed as insolvent, but only to the tune of $190,000.


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