Legislator: 'Hurricane' of Federal Bills Challenge State-Based Regulation

PHILADELPHIA, Jul 12, 2009 (A. M. Best via COMTEX) -- State-based oversight is why "Rome is not on fire" when it comes to insurance regulation, and that system must be defended against a "hurricane" of federal intrusions, the chairman of a key National Conference of Insurance Legislators' committee said.

Alabama State Rep. Greg Wren, chairman of the State-Federal Relations Committee, said even initiatives endorsed by other backers of state-based regulation can be "the camel's nose under the tent moving towards a federal insurance regulator." NCOIL remains opposed to the establishment of a U.S. Treasury office to collect information on the insurance industry, proposed in legislation sponsored by U.S. Rep. Paul Kanjorski, D-Pa., and in a regulatory reform plan proposed by the Obama administration. The National Association of Insurance Commissioners has endorsed the concept.

Because of state-based regulation and systems, the insurance sector has largely not taken the same level of damage that other areas of financial services have during the ongoing recession, Wren, R-Montgomery, said in an interview at NCOIL's summer meeting. "Rome is not on fire in our 50 states as it relates to insurance consumers across the country," he said.

The standpoint of the states, Wren said, is "to make sure that those things that are done well at the state level, particularly in the insurance realm, are not caught up in the hurricane of trying to find solutions to problems that don't exist."

State legislators are willing to cooperate with federal initiatives that "work with the states," Wren said, specifically on surplus lines and producer licensing.

"We understand the need to modernize and streamline," he said.

The Nonadmitted and Reinsurance Reform Act of 2009, introduced in the House of Representatives by Reps. Dennis Moore, D-Kan., and Scott Garrett, R-N.J., is designed to simplify conflicting state laws controlling the placement, tax payment and allocation of premium for multistate surplus lines risks. Regulatory authority over most aspects of surplus lines insurance would rest with the home state of the insured. The law also would dictate the solvency of reinsurers be left to the jurisdiction of the reinsurer's home state regulator, while determinations on whether to grant a credit for reinsurance would be left to the home state regulators of the various primary insurers (BestWire, May 26, 2009).

Introduced by U.S. Reps. David Scott, D-Ga., and Randy Neugebauer, R-Texas, the National Association of Registered Agents and Brokers Reform Act would establish licensing reciprocity for producers through a nonprofit entity to provide multistate licensing and related services. States would retain their regulatory authority over marketplace activity and consumer protection (BestWire, May 22, 2009).

Wren's committee approved a resolution calling for insurance products to be excluded from the purview of a new Consumer Financial Protection Agency proposed by the Obama administration. Legislation introduce by House Financial Services Chairman Barney Frank, D-Mass. closely matches the Obama plan and mostly limits insurance oversight to mortgage and title business (BestWire, July 9, 2009).

(The full audio of an interview with Alabama State Rep. Greg Wren, chairman of the National Conference of Insurance Legislators' State-Federal Relations Committee, will be available soon at www.bestdayaudio.com.)

(By Sean P. Carr, Washington Correspondent: sean.carr@ambest.com)