The National Conference of Insurance Legislators will be focusing next year on broadcasting a message about how well state insurance oversight is working during the financial crisis, said James Seward, NCOIL's new president.
NCOIL said its action items for the coming year are:
o Lobbying Congress on the pros and “mostly the cons” of bills that would create a federal Office of Insurance Information (OII) within the Treasury Department and an optional federal insurance charter (OFC).
o Have NCOIL's financial service committee look at credit default swaps which it maintains is mostly unregulated and see if there is a role for NCOIL in creating oversight of these products.
o Get more states to come on board with the Interstate Compact for life products–(this has been advanced by both NAIC and NCOIL as a good reason why state oversight works).
o Develop a uniform producer licensing model with the NAIC, which NCOIL says is an argument for state regulation.
NCOIL discussed its aims for the coming year during its annual meeting in Duck Key, Fla., last week. The organization spent time exploring the current financial crisis and what it means to insurance consumers and insurance companies, said Mr. Seward, a New York Republican state senator from Oneonta, N.Y.
NCOIL will devote part of its meetings in the coming year to “keeping a close handle on this issue,” Sen. Seward said.
“We are very proud of the fact that insurance companies are weathering this and that those entities under state insurance regulation are coming through this [crisis] much better than those entities that are federally regulated,” he continued.
There is concern that “Washington may look at the financial meltdown in a knee-jerk way to push for federal regulation,” Seward added.
The failure of federal regulation to catch the crisis was a great part of the discussion in the meeting that just concluded and will continue to be part of that discussion, he said.
Kentucky State Rep. Robert Damron, D-Nicholasville, who is NCOIL vice president, agreed that the crisis and the way that credit default swaps were handled is a good indicator that states are better at regulating insurance products. He said it showed how the federal government “totally dropped the ball” in preventing the financial crisis.
He said that there was a discussion among state insurance legislators and state insurance regulators over how the two groups really need to work together to preserve state oversight of insurance regulation.
It was a point that Iowa Insurance Commissioner Susan Voss, who is secretary-treasurer with the National Association of Insurance Commissioners, Kansas City, Mo., also emphasized.
Ms. Voss pointed to how state regulators are taking calls from consumers and producers trying to calm them during the current financial crisis.
She noted that at least in Iowa, there have been many calls from producers concerned over the viability of American International Group, which has come under federal control, and whether they should continue selling AIG's products. Her department has tried to reassure producers, she said.
While state regulators and legislators spoke in unison on this issue during the NCOIL meeting, other issues still need to be resolved, according to interviews.
A letter from NCOIL will go out asking state insurance commissioners at NAIC to stop branding a life settlement model law as an NAIC-NCOIL model when in fact, it does not have the endorsement of NCOIL, according to Kentucky State Rep. Robert Damron, D-Nicholasville and NCOIL vice president.
The model that is being touted as a joint effort, he explained, actually includes provisions such as a 5-year ban on the sale of a life insurance product that NCOIL specifically rejected. NCOIL adopted a model that has a 2-year ban on a sale.
Other issues cited by Mr. Damron that received discussion during the annual meeting include an NAIC reinsurance proposal that would create a reinsurance office that would be run by the NAIC but require federal approval since it would create an entry point for reinsurance from foreign reinsurers.
He said, it would be better if state legislators created a compact to achieve this end because ceding state authority could lead to a “slippery slope toward and OII or an OFC.”
Commissioner Voss also discussed the proposal by the Securities and Exchange Commission in Washington to regulate fixed indexed annuities and potentially reclassify them as securities.
Ms. Voss said these products are insurance products and told NCOIL attendees during a panel that the NAIC is pursuing efforts including suitability and disclosure models that will reinforce the job that already is being done.
On the issue of the market conduct annual statement project, Eric Goldberg, representing the American Insurance Association, Washington, and Deirdre Manna, representing the Property Casualty Insurers Association of America (PCI), Des Plaines, Ill., spoke to legislators during a panel discussion.
Mr. Goldberg said that AIA would like to see NCOIL pass a model that would not change the work of the NAIC, but enable the market conduct annual statement project to proceed with the assurance that information shared would be confidential.
Ms. Manna said that PCI is interested in protecting confidentiality of company data that is shared and a model could be a way to do that, although such a path could be difficult and very complicated.
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