A strong Federal Insurance Office would create healthy competition at home and a level playing field for U.S. insurers abroad, Rep. Ed Royce, R-Calif., said at a House Financial Services Committee hearing on June 13.
Royce, a senior member of the committee and chairman of the House Foreign Affairs Committee, made his comments in response to testimony by Ben Nelson, CEO of the National Association of Insurance Commissioners, at the hearing.
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The hearing was requested by state insurance regulators at the urging of insurance industry trade groups, including the American Insurance Association, the Financial Services Roundtable, the National Association of Mutual Insurance Companies and the Property Casualty Insurers of America. All are concerned with any potential Federal Insurance Office role in insurance regulation, as well as by taking the lead in talks being conducted internationally aimed at creating uniform and high capital standards.
Nelson has criticized FIO director Michael McRaith for not pushing back strongly enough in international talks, in favor of regulatory standards that would support current U.S. insurance oversight policies, namely a decentralized, state-level system.
In response, Royce contended that discussions on international insurance regulation “always bring us back to the lack of uniformity in the state-based system – even on issues most of us agree on, such as solvency, producer licensing, and product approval.”
Royce cited a lack of transparency in the way the NAIC does business as justifying a strong role for the FIO, which was created through the Dodd-Frank financial services reform law in order to give federal regulators a stronger role and greater expertise in insurance activities.
“When the entire NAIC membership meets in private to discuss matters of public policy, and only discusses the matter publicly after a news leak, does this undermine credibility?” Royce asked Nelson, suggesting that the NAIC does too much behind closed doors.
Royce went on say that the NAIC’s alternative to a national regulatory regime — its system of model legislation drafted for state regulators to adopt as desired — has proven to yield inconsistent results. “Even when largely adopted we end up with variant language among the states,” Royce said.