A senior member of the House Financial Services Committee (FSC) today asked the Federal Insurance Office (FIO) to conduct a comprehensive review of the operations and structure of the National Association of Insurance Commissioners (NAIC).
The review is needed, Rep. Edward Royce, R-Calif. said, as a “necessary” threshold step “prior to having a comprehensive discussion on the future of U.S. insurance regulation” because the NAIC “currently labels itself” the "home of U.S. insurance regulation."
He said that he has observed over the years that he has been in Congress, that the insurance regulatory regime in this country is “out of date and inefficient, and the heart of that system is the NAIC.”
Royce requested the review in a letter delivered today to Michael McRaith, FIO director.
He said NAIC practices are problematic from a legal perspective as well as from a good governance perspective.
“If they were a federal regulatory agency, there would be checks on their budget and their operations,” Royce explained.
“Unfortunately, very few checks exist today on the NAIC,” he added.
"This is a pot that needs some stirring and we're appreciative of Congressman Royce's activism on these issues. The truth is that as the federal OFC debate has faded, there is a need for these kinds of questions to be asked. The transparency issues, in particular, have persisted at the NAIC and arguably gotten worse, " said Joel Wood, senior vice president for the Council of Insurance Agents & Brokers, Washington.
NAIC officials in Washington confirmed that they had received the letter, but said they would have no comment.
Royce is a senior member of the Capital Markets and Financial Institutions and Consumer Credit Subcommittees of the FSC.
He said that, "Despite not having general Congressionally-authorized regulatory power” recent NAIC actions “would suggest it and its members believe it does, in fact, have regulatory authority."
“And despite claims that most policy discussions are held in a public forum, meeting records suggest otherwise,” Royce said.
"My ‘ask’ to Director McRaith in this letter is simple: take a look at the NAIC’s structure, the actions it is taking, and its budgetary process," Royce said in the letter.
“Does it have the necessary accountability?” Royce asked.
In the letter, Royce asked that the FIO study he wants McRaith to undertake should “highlight areas that are in need of improvement.”
“It is my hope that Director McRaith’s pending report on insurance modernization will kick off a debate on the future of insurance regulation in the U.S.; however, I don’t believe we can have that discussion without first conducting an analysis of one of the key players in the existing system," Royce said.
Elizabeth Festa contributed to this report