Leader's Edge logo Legal Ease by Scott Sinder Tell the Editor
Legal Ease by Scott SinderNo There There

The NAIC’s record of doing little to nothing remains intact. Now let’s see what happens when Congress puts regulators’ feet to the fire.

By Scott Sinder

The NAIC’s spring meeting in March was not, as I had feared, “Groundhog Day.” This was New York, after all, and even the state regulators cannot dampen the city’s energy and excitement. The event itself, however, attended by more than 1,700 regulators, lobbyists, lawyers and hangers-on, yielded little discernible progress on issues of importance; there was no public discussion of TRIA, congressional attempts to repeal McCarran-Ferguson, or federal regulation of insurance.

The meeting was shorter than usual—three days instead of four—and according to some attendees seemed to be lacking focus. With apologies to the late Gertrude Stein, there was “no there there.”

Nonetheless, it appeared a good time was had by all. More than a dozen new commissioners attended. Eric Dinallo, the former general counsel of Willis who was nominated as New York insurance superintendent by Gov. Eliot Spitzer, offered sightseeing suggestions for the frugal traveler and, helpfully, outlined a number of issues that he intends to pursue at the insurance department. Dinallo’s left coast counterpart, Steve Poizner of California, was also there. Poizner will host the regulators at their June meeting in San Francisco.

Some of the other new commissioners attending were: 

  • Marci Morrison (Colo.), a former state legislator and mayor who was consumer representative to the NAIC.
  • William Deal (Idaho), an insurance agent and former state legislator.
  • Nonnie Burns (Mass.), a former Massachusetts Superior Court justice.
  • Doug Ommen (Mo.), former deputy commissioner and general counsel of the Missouri department.
  • Mary Jo Hudson (Ohio), a lawyer who worked at the Ohio insurance department and as general counsel of the Office of the Ohio Insurance Liquidator.
  • Scott Richardson (S.C.), a former state legislator and insurance consultant.
  • Leslie Newman (Tenn.), a lawyer who has served in both public and private practice.
  • Paulette Thabault (Vt.), a lawyer and nurse who was deputy commissioner of the Vermont Health Care Administration.
  • Sean Dilweg (Wisconsin), who has served for several years as a close advisor to Gov. Jim Doyle.

The New York meeting was the swansong for outgoing Pennsylvania Commissioner Diane Koken, who is returning to the private sector after having served as NAIC president, chair of the Interstate Life Insurance Compact Commission and chair of the NIPR board. Replacing her on the NIPR Board is Roger Sevigny, the New Hampshire insurance commissioner and NAIC vice president. Julie McPeak, director of the Kentucky insurance department, was also installed on the NIPR Board. (Attorney John Fielding serves on the NIPR Board on behalf of the Council.)

Despite the relative inaction (fittingly, the commissioners attended a showing of the Broadway hit “The Drowsy Chaperone”), there was some activity on issues important to Council members, particularly in the area of surplus lines. At the Producer Licensing Working Group, commissioners opened consideration of a draft interstate compact that would make uniform the surplus lines requirements of states participating in the compact. The proposed compact and the proposed federal surplus lines legislation take differing approaches:

  • The federal bill provides for a single point of payment for surplus lines premium taxes. The compact would make the tax allocation system work better, but would still require multiple payments to multiple states. 
  • The federal bill streamlines some surplus lines regulatory requirements—such as the sophisticated policyholder exemption—but defers, for the most part, to the home state of the insured, which is given regulatory authority over surplus lines transactions. The compact, by contrast, seeks to make all state surplus lines laws and regulations uniform.  Thus, all declination requirements, white lists, filing rules and other requirements would be the same from state to state.

Although the two do not mesh perfectly, it is very early in the process for the compact. The draft is a start and likely to be revised extensively as it makes its way through the NAIC process. The Council’s top legislative priority this year is passage of the federal surplus lines reform legislation, which would remit surplus lines premium taxes to the state of the policyholder’s corporate treasury. For The Council, that is good enough. But once the federal legislation is passed, state regulators will need to find a way to make the new premium tax system work. If the compact can provide a format for that interstate cooperation, that’s fine with us.

Although this was a relatively slow start for the regulators, I expect action to pick up as the year progresses and Congress turns up the heat. Nothing gets the regulators to “dance” like putting their feet to the fire.

Sinder is CIAB general counsel.

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