NEW YORK–A key Rhode Island lawmaker has told the National Association of Insurance Commissioners it is using its state accreditation process to infringe on the powers of state legislators.
The verbal sparks came from Rhode Island State Rep. Brian Kennedy, D-Ashaway, who is president-elect of the National Conference of Insurance Legislators.
His remarks came Saturday during one of the forums at the NAIC meeting that concludes here today.
The practice of granting states NAIC accreditation started in the last decade with the aim of obtaining a uniform application of solvency laws, such as risk-based capital and financial examination laws.
Some state lawmakers in the past have questioned if regulators were stepping over the line into legislative prerogatives in requiring states to enforce certain laws.
At the Accreditation Committee meeting Saturday, Mr. Kennedy told regulators that expanding accreditation to new areas threatens state legislative authority.
He referred specifically to the Insurance Receivership Model Act and the Sarbanes-Oxley-inspired amendments to the Model Audit Rule as examples of what he described as controversial legislation forced upon states by virtual fiat from the regulators.
Several stages lasting about four years must pass before such laws become accreditation standards, during which time regulators look at the kind of acceptance they gain in the states.
NCOIL objected strongly to the amendments to the Model Audit Rule when they were under debate at the NAIC. They require companies to undertake internal control reviews and bar carriers from hiring their auditors as consultants.
One concession from the regulators included the requirement that states had to approve the amendments rather than have them automatically imposed by reference to the Model Audit Rule.
But since the Model Audit Rule is itself an accreditation standard, it remained unclear if it was possible for a state to reject the amendments and still remain accredited.
Rhode Island Commissioner Joe Torti said he hopes to work with Mr. Kennedy to alleviate his concerns, but said there were no immediate plans to alter the current accreditation process.
New York remains the only state without NAIC accreditation, and Eric Dinallo, the state's new acting commissioner, said jestingly, "Please help me get accredited."
He commented that his state's placement on the Accreditation Committee seemed like some kind of cosmic joke.
And while New York remains the only state without accreditation, there was a suggestion voiced by a trade group at the meeting that NAIC might want to put Florida in the same category based on recent actions in that state's legislature.
Earlier this year Florida lawmakers passed a package of measures to deal with a property insurance crisis that included a little-noticed provision to set up an office to reduce collateral requirements for foreign reinsurers. A similar proposal has been discussed by the NAIC for years, but was never acted on.
Mike Koziol, assistant general counsel of the Property Casualty Insurers Association of America, commenting on Florida's move said, "This seems to me like it could put the state's accreditation in jeopardy."
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