NAIC Begins Push to Promote State-Based Insurance System Amid Calls for International Standards
July 18, 2014 by Thomas Harman
WASHINGTON – The National Association of Insurance Commissioners is preparing to counter arguments that the U.S. insurance industry should move toward international standards with a campaign demonstrating the benefits of the nation’s state-based regulatory system.
The NAIC is beginning its information initiative, “Protecting the Future,” because of concerns about the demands by federal and international regulators as they press forward with efforts toward a one-size-fits-all approach to U.S. insurance oversight, said NAIC Vice President Michael Consedine, Pennsylvania’s insurance commissioner.The effort will look to educate policymakers and others about the role of the insurance industry while driving home the message that the state-based regulatory system is best able to protect consumers, set capital requirements, manage risk and ensure stability in markets.
The NAIC’s announcement said that despite the U.S. system’s strong track record, “international forces and a few here at home are seeking unprecedented authority over the U.S. insurance industry … seemingly forgetting that the state-based insurance regulatory system performed well during the 2008 financial crisis, while the federal banking regulatory system collapsed.”
The NAIC said the U.S. has committed itself to improving “too-big-to-fail” financial institutions as European regulators seek a one-size-fits-all, capital-based approach that would dramatically change the way insurance companies hold capital and make investments (Best’s News Service, April 24, 2014). In Basel, the G-20 is pushing capital standards that the NAIC announcement said would place U.S. insurance companies at an economic disadvantage and undermine the U.S.’s state-based insurance regulatory structure.
Consedine, a current member of the U.S.-European Union Steering Committee project, said discussion of U.S. system benefits has been slow to arrive. “We need to do a better job of telling the story of state insurance regulation and what it does for consumers and what it does for the market,” he said.
Bank-centric regulations sought by international groups are unnecessary, he said. “We shouldn’t default into the conventional wisdom that we should radically change things,” he said. “If you sit down at the international table, there is really this view that the U.S. system is antiquated, provisional, provincial and not suited for the global marketplace.”
The new initiative will discuss why the state-based system worked during the financial crisis and what was done to improve the system. “It boils down to why it works for us,” Consedine said.
Consedine said questions about the directions taken in international proposals as well as the roles of U.S. regulators, the Treasury Department, the Federal Insurance Office and the Federal Reserve and the cumulative impact on the state-based U.S. system are emerging from the NAIC, members of Congress and consumer representatives. “The messaging will be around those points and questions that appropriately come from that discussion,” he said.
Consedine said he wants to see the new initiative provide “a full record and an accurate record on how the state regulatory system works – its benefits and the efforts we’ve made to try to improve them.”
(By Thomas Harman, associate editor, BestWeek: Tom.Harman@ambest.com)
