On the second day of the summer meeting of the National Conference of Insurance Legislators, Troy, N.Y., many issues were addressed. Here are some takeaways:
On a proposed Consumer Financial Protection Agency: Ethan Sonnichsen, director, government relations with the National Association of Insurance Commissioners’ Washington office explaining to legislators that even though there is a carve out for insurance in the CFPA, part of President Obama’s planned overhaul of financial services regulation, there is still a need for state insurance regulators and legislators as well as the industry to be watchful. The reason, he explained is that many products that would be regulated because they are sold by other financial services entities including banks are connected to insurance. So, for instance, while you might receive a car loan through a bank, that car will still need insurance.
On a resolution on a proposed CFPA: A resolution advanced during the state-federal relations committee stated that a CFPA or any other new or existing federal agency “should not have direct or indirect jurisdiction over insurance products-including credit, mortgage and title insurance, and/or insurance related matters.” The proposed entities should not have jurisdiction over “all” insurance products and insurance related matters, the resolution states.
Doug Head, executive director of the Life Insurance Settlement Association, Orlando, Fla., asked legislators to be attentive to the language in HR 3126, specifically “the business of insurance.” There needs to be a well-defined description of insurance, he continued. The life settlement industry is attentive to whether life settlements will be included in this language, Head explained. The language in the Consumer Financial Protection Agency Act of 2009 states that “…the Agency shall not define engaging in the business of insurance as a financial activity (other than with respect to credit insurance, mortgage insurance or title insurance as described in this section.”
On credit default swaps and hedging risks: Hampton Finer, deputy superintendent and chief economist with the New York insurance department, pointed out that prior to the introduction of credit default swaps, the way to minimize risk was to sell the bonds that created additional risk in a portfolio. While much of the problem for credit default swaps comes from outside the industry, Finer said that “we need to fix our insurance house and said that the work of legislators on a CDS model as well as action such as a bulletin issued by the New York Insurance Department last September following the meltdown of the financial system and American International Group, New York, will help move toward that goal. The insurance industry needs to pull back from products with the greatest risks, Finer added.
On NCOIL’s Market Conduct Annual Statement confidentiality model act: Susan Voss, Iowa insurance commissioner and NAIC vice president, urged state insurance legislators to not establish hurdles that will make it difficult for state insurance commissioners and their departments to share confidential information on companies. She acknowledged that there has been general concern over a centralized data repository. But, she told NCOIL legislators, there needs to be a balance found where regulators retain the capability to share data and consumers have access to aggregate data and that a group that includes industry is seeking to find that balance.
Deirdre Manna vice president-regulatory and political affairs with the Property Casualty Insurers Association of America, Des Plaines, Ill., said that companies are left with little comfort because there are a number of commissioners that want open all data from market conduct analysis to the public domain.
Joe Thesing, director of state affairs with the National Association of Mutual Insurance Companies, Indianapolis, applauded the NCOIL model saying that it is consistent with NCOIL’s market conduct surveillance model act.
Ultimately, NCOIL legislators deferred advancing the model so that proposed amendments could be reviewed and further considered.
On a tussle over NAIC fees being fought in Michigan: A discussion indicates that just before July 4 several Michigan domestic companies got into a disagreement with the Michigan department over fees to be paid to the NAIC. The fees are for access to filing financial statements and are modest, according to Mary Jo Hudson, Ohio insurance commissioner, representing the NAIC. The crux of the issue centers around a promise that was said to have been made by a previous insurance commissioner that these companies would not have to pay the fees. Now the company is being told that they will have to pay the fees. It is unclear whether the issue will end up in court, according to the discussion. It is expected that the fees will be paid, but another option is not to participate in the filing system and then file individually in individual states.
On producer background checks: Wes Bissett, senior counsel for state government affairs, of the Independent Insurance Agents & Brokers of America, Alexandria, Va., said that because of other major issues including health care reform and the CFPA background checks may not currently be a priority. But, he continues, if the issue is addressed, background checks should be done on a resident basis and not on a non-resident basis. Any work on the issue should reflect proper confidentiality and privacy protections, a strong appeals process and hold board of directors and management up to the same standards producers are held to.
David Eppstein, director of state affairs with PIA National, Alexandria, Va., urged that any fingerprint and background checks be uniform and said that whether a uniform, national system is done through a federal bill or state by state, it is possible to get to that point.