The National Association of Insurance Commissioners shouldanswer tough questions about what it is and the true scope of itsauthority, according to a senior member of the House FinancialServices Committee.

Rep. Ed Royce, R-Calif., who is also chairman of the HouseForeign Affairs Committee, said in a speech before the NationalRisk Retention Association in northern Virginia that NAIC has beenschizophrenic, with NAIC officials telling the industry, members ofCongress and federal regulators “that they are not a regulatorybody. They are an association made up of regulators.”

“On the other hand,” he added, “they impose their will oncompanies–and states–through national accreditation standards…whilerepresenting the United States in international negotiations onrules they have no ability to enforce on a uniform basis.”

Royce said the House FSC should examine the issue.

An NAIC spokesperson said the association had no comment at thistime.

Royce has also been highly critical of the NAIC's use of aDelaware-based business to provide state-regulatory officials withtravel money so they can spread the gospel of state regulation.Royce said his analysis is that this company, called NAIC-Newco,will provide state-insurance officials with $1.3 million in travelfunds this year.

“I do not think it is too much to ask that the $80 million tradeassociation define who it is and what it can do…but of course toughquestions draw criticism,” Royce said.

Royce also discussed the long-awaited regulation modernizationreport being crafted by the Federal Insurance Office, explainingthat he sees it “as a watershed moment for future regulation” ofthe insurance industry.

He said he will ask the FSC for a hearing because creation ofthe FIO, Federal Reserve Board oversight of insurers that ownthrifts, and the designation of some insurers as systemicallysignificant have created a “new normal for insurance regulation”— asystem of “layered, overlapping regulation.”

Specifically, he said the states “are the historical regulator,”the NAIC is the “de facto regulator,” and “the federal governmentis the new and expanding regulator.”

He also noted that, through its disparate impact regulation,“the Department of Housing and Urban Development is venturing intothe world of homeowners insurance.”

Royce is a strong supporter of the FIO, and testified in Junebefore the House FSC that Congress should support a strong role forthe new agency in overseeing the insurance industry because stateregulation discourages uniformity.

Royce said he is hopeful the upcoming FIO report “will point toareas where we can improve uniformity of regulation and licensingand lower costs to consumers.”

He said insurers and agents “should not let the moment go by”without pushing back against the sentiment to maintain the statusquo.

He said release of the report offers an opportunity for theindustry “to look for ways to improve regulation, while increasinguniformity and the role of market forces.”