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NCOIL Resolutions Support State Regulation, Nat Cat Legislation

Committees of the National Conference of Insurance Legislators (NCOIL) have reaffirmed the organization's longstanding support of state regulation of insurance, and also endorsed the...
March 21, 2006

David M. EppsteinBy David M. Eppstein
Director, State Affairs
PIA National

Committees of the National Conference of Insurance Legislators (NCOIL) have reaffirmed the organization's longstanding support of state regulation of insurance, and also endorsed the concept of a national mega-catastrophe program.

The actions came during the just-completed NCOIL spring conference in Weston, Florida.

Approved by an overwhelming margin in the State-Federal Relations Committee, the "Resolution in Opposition to Federal Preemptive Insurance Regulatory Measures" recognizes that state governments are the proper entities to determine insurance public policy, as authorized under the McCarran-Ferguson Act of 1945, and says that states are the historic protectors of insurance-buying consumers.

The resolution notes that local jurisdictions are more responsive to the needs of constituents and more knowledgeable regarding unique market conditions. It also criticizes proposals involving federalization now circulating on Capitol Hill.

"Initiatives are being contemplated by certain members of the United States Congress that would destroy the state system of insurance regulation and create unwieldy and inaccessible federal bureaucracies - all without consumer demand," the resolution states in part.
 
The resolution also warns that optional federal charter proposals and the State Modernization and Regulatory Transparency (SMART) Act now looming in Congress would create new "federalized" regulatory approaches that would subject consumers to untested and conflicting federal standards.

Lawmakers in Ohio, Texas, Michigan, Rhode Island, New York, and North Dakota, among other jurisdictions, either have passed or are in the process of adopting resolutions urging Congress to keep insurance oversight a state prerogative.

The resolution states that such proposed schemes would straitjacket state legislatures, governors, insurance commissioners and attorneys general while jeopardizing the critical revenue that states receive from premium taxes. This is not, the resolution says, the way to effect appropriate reform. NCOIL's Executive Committee passed this resolution on February 25.

Natural Disaster Legislation

Another NCOIL committee approved a resolution that supports the concept of a national mega-catastrophe program.

The resolution, by the Property and Casualty Insurance Committee, also states that NCOIL welcomes dialogue between Congress, state legislators, NAIC, insurance companies and interested parties regarding the appropriate role of the federal government in ensuring that Americans are provided with the opportunity for adequate insurance protection for losses arising from catastrophic natural disasters.

NCOIL resolved that it does not at this time endorse or reject any particular approach, but believes that an overall investigation of the issue is required and that legislators, regulators, insurers and others must recognize the time sensitivity of these deliberations. The resolution also says NCOIL has "strong concerns with many details" of a proposal suggested by the NAIC proposing a multi-layered catastrophe program and a soon-to-be developed NAIC comprehensive mega-catastrophe policy.

The resolution was unanimously forwarded to NCOIL's executive committee. In other action at the NCOIL meetings:

The Task Force on Terrorism, chaired by Assemblyman Ivan Lafayette of New York, heard an update on the reauthorization of the Terrorism Risk Insurance Act (TRIA) from Michael McCarter, Chair, American Academy of Actuaries TRIA Subgroup.

After summarizing the differences between the original TRIA and the extended version, McCarter then turned to what to look forward to in the year ahead. The TRIA extension requires the President's Working Group on Financial Markets (PWG) to report to Congress by September 30, 2006 on the long-term availability and affordability of terrorism insurance, including group life.

The Academy TRIA Subgroup will provide input to the PWG by June 1 in the form of a two-part study. Part one will be an assessment of the private market for terrorism insurance in the absence of some national framework such as TRIA. Part two will be considerations for the design of a national framework to encourage the private market for terrorism insurance. The Committee then discussed long-term solutions to terrorism insurance.

The Property and Casualty Insurance Committee, chaired by Senator Pam Redfield, of Nebraska, considered an extraordinary life circumstances amendment to the NCOIL Credit Scoring Model Act.  The committee adopted it.

The State-Federal Relations Committee/NCOIL-NAIC Dialogue, chaired by Representative Craig Eiland, of Texas, heard an update on the status of optional federal charter initiatives and the State Modernization and Regulatory Transparency Act (SMART).  A representative of the American Bankers Association (ABA) spoke in favor of optional federal charters. The committee went on to reaffirm NCOIL's opposition to such proposals (see above).

David M. Eppstein davidep@pianet.org is Director of State Affairs for PIA National.

PIA Connection

This article originally appeared in the March 2006 PIA Connection.