Filed Under:, West

NAIC Clarifies Role: It Is Not a Regulator

NU Online News Service, March 21, 9:19 a.m. EDT

The National Association of Insurance Commissioners acknowledges in a letter to a member of Congress that it is not a “regulatory body,” but acts to provide a “forum and vehicle” for its members who are standard-setters.

The NAIC’s lengthy response came after a request by Rep. Ed Royce, R-Calif. Royce, a senior member of the House Financial Services Committee to clarify its legal standing after its decision to describe itself as a “standard-setting organization” rather than a trade group.

The request was made in a letter dated Feb. 28.

The NAIC response was signed by Kevin McCarty, Florida insurance commissioner and NAIC president and obtained by NU Online News Service last night.

Specifically, McCarty says, “The NAIC does provide a forum for members to establish regulatory policy, standards, and best practices. However, the decision to implement such standards remains with the individual states."

At the same time, McCarty voices indignation that critics who style the NAIC as a “trade group.”

He acknowledges that the NAIC is registered with the Internal Revenue Service as a non-profit. But, he says, “The NAIC is not a trade association and you are correct that members of the NAIC object to its characterization as such.”

McCarty says a “trade association is made up of businesses or business people in a common field and is designed to assist its members and its industry in dealing with mutual business problems.”

By contrast, he says, “The NAIC is an association of elected and appointed state-regulatory officials charged with regulating the insurance industry under state law.”

He acknowledges in the letter that there “may be some confusion” regarding the role of the NAIC in the national state-based system of insurance regulation and adds that he hopes the letter serves as sufficient clarification.

McCarty says the NAIC "does play an integral role in the national system of state-based regulation as a forum for standard setting, but it is not a regulator."

He adds, “There can be confusion when collective state-regulatory actions developed at an NAIC meeting are mistakenly referred to as actions ‘of the NAIC’ in the press or elsewhere, but at no time has the organization itself represented that it is a regulator.”

McCarty responds to the particular NAIC activities Royce talks about in his inquiry by stating, “The NAIC activities you have identified do not amount to regulating interstate commerce or exercising regulatory authority as the NAIC simply provides these resources to assist the states in carrying out their regulatory functions.”

He says that this is consistent both with former NAIC President and Iowa Commissioner Susan Voss’ testimony, which stated that the NAIC as an association is not a national or federal regulator.

Royce asked for the clarification within the context of the impending Federal Insurance Office report to Congress on the state of the U.S. insurance-regulatory system.

Royce says in his letter that “understanding precisely what the NAIC is and how it is governed—and reconciling the NAIC's own inherently inconsistent statements about itself—is timely and relevant.”

The letter was prompted by the NAIC’s decision Dec. 19 to have its membership approve a change in designation in a conference call of all commissioners.

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