If supporters of the state-based insurance regulatory keep going after the Federal Insurance Office, critics of that system that could go after the National Association of Insurance Commissioners (NAIC).
Rep. Ed Royce, R-Calif., a longtime critic of the NAIC, raised the possibility of an attack on the NAIC’s efforts to coordinate state insurance regulation Tuesday, during a hearing in Washington organized by the House Financial Services Committee’s housing and insurance subcommittee.
“States cannot uniformly act when there’s a crisis,” Royce said. “That’s just a practical reality here.”
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When the NAIC, a private group for state insurance regulators, has tried to make up for its lack of legal authority to coordinate state regulatory efforts, it has filled the void using mechanisms that are not constitutional, Royce said.
“How could a private corporation have evolved into being able to effectively dictate nearly the entire insurance regulatory structure in the United States?” Royce asked.
He objected to NAIC insurance regulatory agency accreditation standards that encourage states to incorporate updates to some NAIC standards automatically, “by reference,” rather than putting the update-related changes through the usual legislative approval process.
Royce, the third highest-ranking Republican on the housing and insurance subcommittee, said he would like to see the House Financial Services Committee hold future meetings on that issue.
Royce has been critical of the NAIC for years, without attracting much visible support for that position. It’s possible that the shift toward populism among House Republicans could weaken his position, by increasing support for the idea of state-based insurance regulation. But the shift toward populism could also increase interest in scrutiny of existing financial services regulatory strategies.
The housing and insurance subcommittee has posted a video recording of the hearing, and copies of written versions of the witnesses’ testimony, here.
The NAIC is a Kansas City-based group for state insurance regulators that brings state regulators together in efforts to develop models for insurance laws and regulations. It also develops models for handbooks and other documents that can help insurance regulators do their jobs, and it compiles insurance sector data.
The federal McCarran-Ferguson Act, a 1945 law, gives states jurisdiction over the business of insurance, except in cases in which Congress has actively decided to give the federal government over those matters.
A 2010 law, the Dodd-Frank Act, created the Federal Insurance Office, an arm of the U.S. Treasury Department that’s supposed to advise the federal government on the state of U.S. insurance markets and insurance regulation, warn the federal government of possible sources of insurance-related threats to the stability of the financial system, and represent the U.S. insurance sector in international negotiations.
Two Federal Insurance Office Bills
The House Financial Services housing and insurance subcommittee set up the hearing mainly to promote two federal insurance bills: H.R. 3762, the “International Insurance Standards Act of 2017″ bill, and H.R. 3861, the “Federal Insurance Office Reform Act of 2017″ bill.
Both bills were introduced by Rep. Sean Duffy, R-Wis., in September.
Both bills have a Democratic cosponsor: Rep. Denny Heck, D-Wash.
Katharine Wade (Photo: House Financial Services)
H.R. 3762 would require the Federal Insurance Office to coordinate with state insurance regulators when conducting international negotiations, and to consult with state insurance regulators and Congress before entering into any international insurance agreements.