Congress To NAIC: Help Us Make Changes
By Arthur D. Postal, Washington Bureau Chief
National Underwriter News
March 14, 2005
Washington—The Republican leadership of the House Financial Services Committee has told the NAIC its plans to complete work on legislation setting federal standards for state insurance regulators by mid-June in hopes NAIC's new leadership will become more involved in the drafting, according to several Washington lobbyists.
The letter, signed by panel chairman Rep. Mike Oxley, Ohio, and Rep. Richard Baker, Louisiana., chairman of the key Capital Markets Subcommittee, deals with getting input and making revisions to the State Modernization and Regulatory Transparency Act (SMART).
The panel worked on the legislation from last April until the Congress adjourned last November, but the bill was never introduced nor made public because no consensus acceptable to all interests was reached.
State commissioners, led by then NAIC president Ernst Csiszar, Arkansas commissioner Mike Pickens and New York Superintendent Greg Serio "were very engaged” in the process of drafting last year's bill, one lobbyist said. All three have since left their regulatory posts.
And since a total of 10 commissioners have left over the last year, Reps. Oxley and Baker are concerned that the NAIC "risks being marginalized” unless the commissioners take a more active role in drafting the bill, the lobbyist said.
A committee official did not respond to requests to confirm that the letter had been sent to the NAIC, which is currently holding its quarterly meeting in Salt Lake City.
The lobbyist said Reps. Oxley and Baker are concerned that the new regulators' lack of involvement will create the same situation as existed during work on the 1999 Gramm-Leach-Bliley Act, where existing federal regulators like the Federal Reserve Board and the Securities and Exchange Commission, played a far greater role in drafting the bill than insurance regulators.
The Financial Services panel is working on the bill at the urgent request of industry, which feels that the lack of uniform regulation is raising costs, and, for the life industry, allowing competitors dealing with more uniform rules, like the securities, banking and mutual funds, to grow at a much faster rate.
The timetable of work on SMART in the House Financial Services Committee would take a week-by-week approach, according to the letter. Starting April 6 through a final draft release of April 12, SMART Titles II and III, addressing insurer licensing and surplus lines, would be fine-tuned.
Work on other titles would be completed as follows: Title X and XIV, Anti-fraud and financial surveillance, from April 13-19; Title IX and XIII, reinsurance and receivership, from April 20-26; Title V and XI, life insurance and viaticals, from April 27-May 3; Title II and XII, market conduct and miscellaneous insurance, May 4-10; Title VI and VII, partnership and producer licensing, May 18-24; and, Title XVI, competitive markets, May 25-June 7.
The bill will need bipartisan support. In recent comments, Rep. Barney Frank, D-Mass., ranking minority member of the committee, said his perception of the shape of federal intervention in insurance regulation would be to "require states to defer to other states,” i.e., encouraging interstate compacts and reciprocity.
Reps. Oxley and Baker also indicate they view this approach as having the most support from Republicans on the committee
However, Mr. Frank implied that he would support legislation facilitating such reciprocity only for the life industry. "Property-casualty regulation must remain local,” he stated emphatically, an approach the property-casualty industry rejects, but most state regulators support.
The Property-Casualty industry wants a market approach to regulation, and one of the challenges Reps. Oxley and Baker face in getting a bill through the committee is balancing those concerns.