State insurance lawmakers meeting in Boston earlier this month grappled with a number of issues that in the end all seemed to have a common theme–dealings with their regulatory brethren.
At its meeting, the National Conference of Insurance Legislators sought to untangle itself from an alliance with the National Association of Insurance Commissioners on a jointly sponsored market conduct model surveillance act.
At the same time, however, it was forging another alliance with the NAIC in the area of mega-catastrophe planning with uncertain results.
Florida State Sen. Steve Geller, D-Hallandale Beach, was behind both actions.
As NCOIL president two years ago, Sen. Geller worked hand-in-hand with then NAIC president Ernst Csiszar to create a united front on a market conduct model designed to impress federal lawmakers. At the time, federal lawmakers seemed bound and determined to impose some standardization of insurance regulation over states in the wake of their seeming inability to accomplish the task themselves.
Sen. Geller worked tirelessly to persuade lawmakers to accept some provisions to make the market conduct document more amenable to regulators and was ultimately successful.
But that victory proved pyrrhic when no state showed any interest in introducing the model. So, state lawmakers at the Boston meeting put the finishing touches on the kind of bill they wanted to begin with but were talked out of in the summer of 2004.
Sen. Geller said the joint measure had so many compromises that in the end it had no real champions when it came to the test that matters most–in the statehouses.
The final document should be approved by NCOIL's annual meeting in November.
But it remains to be seen just how significant it will be. Oregon Insurance Administrator Joel Ario, who spearheaded most of the market conduct reforms through the NAIC, said that most states already had the authority to implement the measures needed to streamline the process, which could lessen the importance of any model law.
While one alliance was unraveling, Sen. Geller sought to forge another one in the area of natural catastrophe planning. He teamed up with his home state commissioner, Kevin McCarty, to approve a joint "discussion paper" setting the framework for a new approach to mega-catastrophe planning in the aftermath of the record 2004-2005 storm losses.
Since late last year, Commissioner McCarty has been promoting a fairly dramatic program that would not only establish state and federal backstop funds, but also new approaches to ensure homeowners had flood coverage. While the "all-perils" policy in which the industry would take over flood risk proved to be a nonstarter, the current discussion paper calls for more elaborate measures such as a checklist to ensure homeowners grasp the coverage implications of their policies.
State Farm representative James Tuite said that while his company endorses state and federal backstop funds, he is concerned that any mandatory coverages or checklists could end up as a source of confusion and ultimately litigation.
Sen. Geller urged members of the Natural Catastrophe Subcommittee to push the discussion paper to the parent committee as a sign of movement to the NAIC.
The parent committee, however, refused to accept it, asserting that concerns about the document should be worked out in the lower committee created for that purpose.
In the end, Sen. Geller said it did not really matter since the NAIC has yet to act on the full catastrophe plan.
The discussion paper represents a grab bag of proposals, some of which require federal approval, others which require state legislative or regulatory approval, but it does not take any stand one way or another. A section on a federal backstop speaks of the creation of a federal insurance commission that would set premium charges and attachment points.
At the June NAIC summer meeting, Commissioner McCarty succeeded in getting merely an endorsement of the proposed congressional commission looking into the impact of natural mega-catastrophe risk on the property-casualty industry that could consider some of his proposals.
It remains to be seen how much more work the Florida commission will do to promote the substance of the discussion paper through the NAIC process. If it dies there, NCOIL could be forced to choose another path if it wants to be heard on the subject.
At a separate forum on the optional federal charter that was part of the summer meeting, Consumer Advocate J. Robert Hunter took NCOIL to task for its "schizophrenic" attitude in, on the one hand, virulently opposing a federal role in regulation, while at the same time urging such strong involvement in select issues.
NCOIL is also into the fourth year of its minuet with the NAIC on the issue of liberalizing collateral requirements for alien reinsurers. A resolution to approve such a move has been languishing in the Executive Committee since November 2002, awaiting regulators' action on the subject.
NAIC President Al Iuppa said movement was imminent within the year and urged patience.
Former NCOIL president and Illinois Rep. Terry Parke, R-Schaumburg, said maybe it is time the lawmakers take a leading role in this public policy issue, rather than taking their cue from regulators.
But other members have noted that since regulators would be responsible for devising and administering whatever liberalization mechanism is chosen, state legislative action would not be all that useful ahead of time.
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