The National Association of Insurance Legislators (NCOIL) has sent a letter to key members of Congress cautioning that any proposed reforms should not stand in the way of strong state oversight -- oversight that protected insurers from the fate that recently befell other financial services sectors.

NCOIL asserted that state safeguards would better serve as a model for reform than untested federal proposals, including that of an optional federal charter.

“The stability of state-regulated insurance companies during this ongoing financial crisis, as compared to other financial sectors, demonstrates the effectiveness of our State insurance laws and regulations,” the NCOIL letter states. “While finger-pointing will not repair the problems with the present system, we are proud to note that state-regulated insurers were largely unharmed when compared to federally regulated banking and investment institutions.”

NCOIL officers noted that state legislators and regulators “have facilitated a prosperous 21st century regulatory system that we continue to improve and modernize” and that insurance regulation should not be a focus of reform efforts in Congress.

“We believe that insurance regulation should not be denigrated and unjustly drawn into a broader review of financial services reform,” the letter states. “An optional federal charter (OFC), for example, would undercut successful state insurance regulation. Our unmatched consumer protection laws and solvency and reserving requirements would be bypassed by insurance companies seeking less stringent oversight by the U.S. Department of the Treasury.

Lessons to be Learned From State Insurance Model (PDF file, NCOIL 10/20/08)

NCOIL Letter to Congress (PDF file, 10/20/08)

October 29, 2008