NAIC Makes Its Pitch For The State-Based System


It’s pretty clear that National Association of Insurance Commissioners (NAIC) intends to defend its state-based regulatory turf.

In a strongly worded statement, NAIC said some federal officials and global regulators are seeking “unprecedented authority”over American insurance markets. That authority includes “imposition of bank-centric regulation on insurance companies.”

In response, NAIC said it is “deploying” Protecting the Future, an educational program on “the indispensable role state-based insurance regulation plays in strengthening the U.S. economy.”

What’s noteworthy is that this deployment will occur not only in Washington, D.C., but also in Brussels and Basel, Switzerland.

Washington should come as no surprise. It has been the hub for debate over federal versus state regulation for years. (Not incidentally, the federal/state push-pull was an “issue” even at the group’s founding in 1871 as the National Insurance Convention, on through its expansion as the National Convention of Insurance Commissioners and still later as it became the NAIC.)

But the other locations for deployment may cause a few jaws to drop. Brussels is the capital of the European Union, and Basel is the seat of the Financial Stability Board (FSB) for the G-20. What’s with NAIC carrying the U.S. state-based message overseas?

The international locations are signs of the growing international connectedness in insurance regulation that has arisen since the “global meltdown” of 2008 (and even before). NAIC says it has established “recurring” dialogues with regulators in several countries. It also participates in the International Association of Insurance Supervisors (IAIS), an international organization focused on globally consistent supervision and global financial stability.

But those two locations also bear witness to NAIC’s concern about efforts to establish certain types of international insurance standards. For instance, in March,NAIC President and North Dakota Insurance Commissioner Adam Hamm contended that the FSB has increasingly driven international standard-setting beyond its primary focus on financial stability. “Its work has the potential to impact the U.S. insurance sector,” he wrote in a letter addressed to the head of the Federal Reserve Board, the Securities and Exchange Commission and the Department of the Treasury, and published on the NAIC website.

NAIC’s educational program appears to be an effort to bring education and information into the discussion. As Hamm puts it, “We are going to make sure the compelling value proposition of state-based insurance regulation is well understood by policymakers, business leaders, consumer advocates and economic thought leaders.”

There is a kind of “if-it-ain’t-broke-don’t-fix-it” theme to the NAIC messaging.

For instance, the program announcement maintains that “states have effectively regulated America’s insurance companies for nearly 150 years,” even during the 2008 financial crisis when “the federal banking and mortgage regulatory regimes collapsed.” And it quotes NAIC chief executive officer Ben Nelson as saying that the state-based system “has an unmatched track record and can best adapt to meet our future economic and financial challenges.”

But there is a website, too, and as the program unfolds, there will likely be more aspects to the effort. Whether all of this will change minds and influence policymakers remains to be seen. For now, the development is a signal NAIC has taken it regulatory reach to a new level. Since the state-based system is the law of the land in the U.S., this bears close watching.


Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Connect with Linda →

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