Groundhog Day came again at this fall’s NAIC National
Meeting. Regulators and their hangers-on gathered at the same
Washington hotel that has hosted previous meetings and talked
all the usual issues: accounting rules, actuarial standards,
application requirements, product filings, capital adequacy and
financial accreditation—the whole works.
They “reviewed items previously deferred,”
approved minutes, considered reports, “reviewed
outstanding issues previously addressed,” “reviewed
outstanding tentative positions” and approved charges.
They met in subgroups, working groups, committees and task
They talked and talked and talked.
The meetings can be mind numbing. However, there’s
usually something of interest: producer licensing, surplus
lines, natural catastrophe/climate change, risk retention
groups, and the more mundane, but nonetheless important, issue
of the NAIC budget. So let’s explore.
Producer licensing: The NAIC
has created a coalition of regulators and producer
representatives (including The Council) to determine what needs
to be done to fix problems plaguing the licensing system.
Regulators have stated their desire to push for full
reciprocity and uniformity in producer licensing and to rid the
system of unnecessary regulatory burdens facing
producers—and we are seeing some
Coalition Chair Roger Sevigny, the New Hampshire
commissioner and NAIC vice president, suggests regulators
consider dropping the entity licensure requirement for
producers—a highly controversial start. Sevigny is
pushing his colleagues to address the secretary of state
registration requirements found in most states. Under the Gramm
Leach Bliley Act, these cannot be a prerequisite to
Surplus lines: The NAIC
working group dedicated to the issue met briefly by conference
call the week prior to the meeting and adopted a
“charge” for 2008 to “consider a uniform
method of allocating surplus lines and independently procured
insurance premium tax on multi-state risks.” What this
means remains to be seen.
The group’s assigned tasks do not even mention the
non-tax regulatory burdens imposed on multi-state placements.
Frankly, this simply bolsters The Council’s argument in
support of the Non-Admitted and Reinsurance Reform Act pending
on Capitol Hill. It is clear state regulators are unwilling or
unable to take action without the pressure of federal
A non-regulator group, which includes some regulators and
brokers, met in Washington, D.C., to talk. The surplus lines
offices, with input from the industry and regulatory
participants, have drafted an interstate compact dealing with
surplus lines tax allocation issues and some redundant
regulation faced by surplus lines brokers placing multi-state
risks. Some state surplus lines offices and the regulators in
the group see the interstate compact as an alternative to
federal legislation. Others, including NAPSLO, see the federal
bill as critical to getting the states to move on the
The group does not plan to push the NAIC to adopt the
compact—at least not initially. Rather, it intends to
work through the National Conference of Insurance
Natural catastrophe: South
Carolina Insurance Director Scott Richardson and The Travelers
made the most interesting presentations on natural catastrophe
proposals. The South Carolina proposal would determine
wind/flood losses based on a pre-set allocation. The Travelers
proposal would create a special coastal zone from Texas to
Maine for homeowner coverage. Both the federal government and
the states would be involved in oversight of the marketplace in
the coastal zone. The NAIC Catastrophe Working Group has a
hearing planned for this month’s meeting on the impact of
financial rating agencies on catastrophe insurance markets.
Reinsurance: The NAIC is
putting together a proposal for single-state licensing of U.S.
reinsurers and is establishing a reinsurance supervision review
department at the NAIC. Still in its early stages, the proposal
is intended to enhance the U.S. reinsurance regulatory
structure and create a framework for mutual recognition between
the U.S. and other nations.