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Regulation and Compliance > State Regulation

Nelson invokes 10th amendment in NAIC message

By Elizabeth D. Festa

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For those not able to hear views shared by new NAIC CEO Ben Nelson before insurance executives in Washington this week at a private industry conference where he was scheduled to speak, the NAIC’s homepage has now expanded to include four video segments a presentation by Nelson on issues and priorities.

Most strikingly, Nelson positions consumers back home against the bogeyman of the federal government and European supervisory system in their potential for overreach into state regulation.

Nelson, hired as NAIC CEO in mid-January, uses the phrase “back home” numerous times in the videos, set against the backdrop of the U.S. Capitol, to underscore who the state commissioners are and who they are serving.

“I am always excited about maintaining the support for the 10th Amendment (state sovereignty) when it comes to the regulation of insurance — and sometimes the regulatory interests at the federal level of having more involvement in the regulation of insurance,” Nelson said.

“We don’t want — there’s no need — and when there’s no need, there is absolutely no way that we should just acquiesce to the federal government when we realize the states do the job so well,” Nelson said in the second video, Experience in Insurance Regulation. “If this system was not functioning, well maybe there might be a federal solution to some of it. But there’s no federal solution required to making certain that best practices are engaged in by all the states.”

The former Nebraska governor and U.S. senator (a moderate state-rights Democrat who cast the instrumental vote on the Patient Protection and Affordable Care Act, PPACA) also discussed facing the challenges from European regulatory officials in multiple videos.

“There is a global movement in insurance today that is much more expansive than what it was before,” Nelson said in the video “On the Importance of International Dialogue.” He warned that the U.S. should not allow global developments to “distract us away from our basic jobs of protecting the public back home.” 

European regulators “see things differently,” Nelson said. “They have a different method; they have a different structure of regulatory supervision of insurance. It’s central government, in effect.”

Developments underway that can be corralled into general state insurance industry and regulatory challenges include, internationally, the International Association of Insurance Supervisors’  (IAIS) own ComFrame (Common Framework  for the Supervision of Internationally Active Insurance Groups), the global Financial Stability Board’s (FSB) designation of global systemically important insurers (G-SIIs) via the IAIS, with unclear future structural, organizational and balance sheet requirements, and the pivotal EU-US Dialogue project, begun under the auspices of FIO with much work by the NAIC staff and many state commissioners.

Domestically, there is the Patient Protection and Affordable Care Act (PPACA) implementation fraught with state and federal maneuverings and frictions;  Dodd-Frank Act deliverables such as the Federal Reserve’s prudential regulation of insurers with thrifts and banks; institutions deemed to be  systematically-important financial institutions (SIFIs) by the Financial Stability Oversight Council (FSOC); a variety of proposed heightened increased capital standards and regulatory restrictions and rules; and Treasury’s Federal Insurance Office (FIO)’s statutory role in clarifying how the insurance regulatory system should be modernized and monitored, while acting as a voice abroad.

A report from FIO on insurance modernization, overdue since January 2012, may be released this month, if not before the Presidents’ Day weekend. 

Nelson said it is his and his members’ job to explain to the global community that state-based regulation is best for the United States, while noting their system works well for them. Part of that is letting them know insurance regulation in the U.S. doesn’t need a federal overlay, according to Nelson.

“We don’t have to have the superimposition of a federal regulatory system to be able to deal at the global level,’ Nelson said. “Just because it may seem easier to deal with a single regulator at the national level doesn’t justify moving away from state-based regulation.”

Nelson previously echoed the sentiments of the NAIC leadership in his first public press conference as new CEO January 23rd in Washington by casting the desired relationship with the federal government as one of a “partnership,” not one allowing incursion, pre-emption  nor even dual regulation.

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