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PIA, NCOIL Strengthen Ties During Boston Meeting

BOSTON - PIA officials joined with state insurance legislators from around the nation in July, solidifying their already close relationships and reaffirming the staunch...
September 6, 2006

PIA Celebrates 75th Anniversary With State Legislators, Brevik Defends State Regulation During NCOIL Panel

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

BOSTON - PIA officials joined with state insurance legislators from around the nation in July, solidifying their already close relationships and reaffirming the staunch opposition they share to proposals to federalize insurance regulation.

The scene was the summer meeting of the National Conference of Insurance Legislators (NCOIL) in Boston July 20 - 23.

PIA is forming a stronger relationship with NCOIL, to harness our expertise in an effort to strengthen the state system of insurance regulation while opposing efforts of the federal government to interfere with the states' authority and responsibility to oversee the business of insurance.

NCOIL is an organization of state legislators whose main public policy concern is insurance legislation and regulation.  The legislators who participate in the NCOIL meetings either serve as chair or are members of the committee responsible for insurance legislation in their respective states.

Brevik Showcases Opposition to a Federal Insurance Regulator

The highlight of the four-day meeting came on Saturday, July 22, when PIA National Executive Vice President & CEO Len Brevik participated in a panel discussion entitled "Optional Federal Charters: Serving Consumers or Gratifying Industry?" (See Brevik Blasts OFC During NCOIL Panel, PIA Connection, July-August 2006.)

Rhode Island Representative Brian Kennedy, who is also Treasurer of NCOIL, moderated the panel discussion.  The panel participants were asked three questions:

  • How will consumers be served under the OFC?  Can it match the states in responsiveness and individual market expertise?
  • How would a bifurcated system affect states' carefully crafted rate regulation and state modernization efforts, including the Interstate Insurance Regulatory Compact?
  • What is the cost impact of the OFC?  Has it been measured?  Will consumers eventually pay?  Can states hold on to premium tax revenue?

Brevik effectively answered these questions while countering the arguments made in favor of a federal insurance regulator, pointing out that an optional federal charter for insurance would lead to chaos in the marketplace leaving state guarantee funds on the hook for federal failures.  He cited the savings and loan crisis of the 1980s - which cost American taxpayers more than $160 billion in a bailout - as an example of the failure of federal encroachment that had permitted optional federal charters in banking.

The savings and loan example was a fierce blow to proponents of federal insurance regulation and was cited often by other panel participants opposing OFC.

Brevik then went on to praise the efforts of NCOIL and the NAIC, particularly on the Interstate Insurance Regulatory Compact, noting that the Compact is a good compromise between effective state oversight and the need for uniformity.  On the issue of cost,  Brevik said that the insurance industry paid $13.8 billion to the states in premium taxes in 2004, representing a very significant portion of state budgets and any loss would be devastating.

Participation in this panel further establishes PIA as the leading trade association opposing a federal insurance regulator. There were numerous press reports following the panel that all quoted PIA's comments extensively.  PIA will continue this momentum through the fall elections and for as long as it takes to finally defeat the OFC proposal.

PIA President Ray Peretti hosted a special reception for the state legislators attending the NCOIL meetings, as yet another way to continue to build upon these key relationships. The reception was held in honor of both the lawmakers and PIA's 75th Anniversary.

NCOIL-PIA to Conduct Study on State Authorities

Senator Steven Geller (D-Fla.) offered a motion during a meeting of NCOIL's Insurance Legislators Foundation Board authorizing NCOIL's executive director to enter into negotiations with PIA National to identify the parameters, cost and other issues regarding a study on "States Insurance and Directly Related Powers and Authorities with Resulting/Created State Assets."  The motion passed unanimously as the Foundation Board Members all expressed interest in the study.

This project will further strengthen our relationship with NCOIL and produce a product that will be used as a guide for state and federal legislators and regulators.  The overall theme of the study will proceed from the perspective of the states' primary oversight of the business of insurance. The study will identify and document the legal authority for this by citing court cases and legislation such as the State Action Doctrine, McCarran Ferguson and Gramm-Leach-Bliley.

NCOIL/NAIC Work Together on Natural Catastrophe Plan

The NCOIL Subcommittee on Natural Disaster Insurance Legislation considered the joint NCOIL-NAIC Mega-Catastrophe Plan and voted to pass it on to their Property-Casualty Insurance Committee, with the understanding that further negotiations will take place between NCOIL and NAIC.  The Subcommittee also passed a resolution in support of the adoption of stronger building codes and building requirements.

PIA will continue to review the joint NCOIL-NAIC Mega-Catastrophe Plan in our Natural Catastrophe Task Force and make reports and recommendations to our policy committees.  PIA National will make clear that our position is to support new legislative and regulatory changes to improve the fundamental engagement of federal, state and municipal governments' funding and execution of their infrastructure, land-use, codes, and other mitigation responsibilities in order to protect their citizens from the severe impacts of natural disasters.  PIA will also continue to support the adoption and enforcement of strong building codes.

Terrorism Insurance

The NCOIL Task Force on Terrorism met at this meeting to receive an update on industry efforts to improve our ability to adequately model for and insure terrorism threats.  There is much the industry can do and PIA is working with NCOIL and other interested parties to reduce the potential burden to the federal government as much as possible.  Unfortunately, for the foreseeable future, the federal government must continue to play a role in this effort.

PIA will continue to make it clear that we support the creation of a permanent mechanism for terrorism coverage in order to ensure the continued viability of the existing domestic insurance market, emphasizing the point that without a federal backstop in place, terrorism insurance will not be made available to small to midsize commercial line customers and that without TRIA in place, the federal government will be left to cover 100% of the short-term and long-term costs associated with terrorist attacks.

NCOIL addressed several other issues of importance to PIA members including improving workers compensation coverage by providing clarity in situations where a worker is injured in another state while working on a temporary basis; the conference also considered drafting legislation to regulate Professional Employer Organizations (PEOs).

NCOIL meets three times per year in order to help legislators make informed decisions on insurance issues that affect their constituents.  Another purpose of these meetings, of particular importance lately, is to oppose federal encroachment on state authority to oversee the business of insurance, as authorized under the McCarran-Ferguson Act of 1945.

David M. Eppstein is Director of State Affairs for PIA National.

PIA Connection

This article originally appeared in the September 2006 PIA Connection.