The National Association of Insurance Commissioners is at a crossroads because it must clarify first what it is, and then work out a system for collaborating with federal regulators in overseeing large, multifaceted insurance companies with international operations, according to a former insurance commissioner.
Larry Mirel, a partner in the Washington, D.C., office of Nelson Levine de Luca & Hamilton, said that first, the NAIC is going to have to clarify what it is.
“NAIC said it is not a trade association, but it is really a trade association of state insurance regulators,” Mirel said.
He explained that it has no regulatory authority and claims it is an organization registered with the IRS as a 501(c)(3) charitable organization by the Internal Revenue Service, “but I am not sure it is a charity, and it has said it is not subject to any state laws or Freedom of Information Act requests because it is a public body.”
Mirel, who served as insurance commissioner of Washington, D.C., for six years, notes that Rep. Ed Royce, R-Calif., has raised the same question, and has asked the House Financial Services Committee to hold hearings on the issue. “That is a very important question,” Mirel said.
He said the recent international economic crisis pointed out that the NAIC lacked the authority to regulate complex insurance companies with international operations, especially those whose operations run outside of insurance.
“The states are making a claim that they can be the regulator of all insurance companies, including those who operate on a worldwide basis, but I think less and less that is going to be the case,” Mirel said. “A state insurance regulator has authority only within its own, and has no authority to regulate insurance companies that are doing business outside the state and outside the country,” he said.