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NAIC: Final Financial Regulatory Reform Package Preserves State Role

Posted on 30 Jun 2010

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The National Association of Insurance Commissioners (NAIC) thanked the House and Senate financial reform conferees for largely preserving the critical role of state insurance regulators in protecting consumers and ensuring the viability of the insurance industry.

Throughout the debate on the financial regulatory reform legislation, state insurance regulators emphasized the myriad problems that upset the banking and securities sectors during the recent economic crisis were largely absent in the insurance sector.

“Quick and decisive action by state insurance regulators worked to head off such concerns and ensure that insurance consumers were fully protected,” said Jane L. Cline, NAIC President and West Virginia Insurance Commissioner. “We commend the conferees for recognizing this important distinction and for preserving the key role of state insurance regulators in the nation’s financial markets.”

Cline highlighted several provisions of the legislation that are of particular importance to state insurance regulators. “We were pleased to see that the Federal Insurance Office (FIO) set up under the bill is narrowly designed to carry out its mission while not unnecessarily undermining strong state regulation,” she said. “In similar fashion, the addition of a state insurance regulator to the Financial Stability Oversight Council (FSOC) created by this legislation will add an important safeguard for consumers and provide an early warning system for other financial regulators if an insurance company were to become subject to systemic risk.”

“The package provides senior investment protection grants for annuity suitability, an area where the NAIC and the states have a solid track record,” continued Cline. “The bill also provides important clarification in regulatory authority for indexed annuities, ensuring that these guaranteed products are under the clear authority of state insurance regulators.”

The measure also makes clear that state insurance regulators will continue to have the ability to “wall off” insurance companies from troubled holding companies, protecting insurance policyholders from other risks in the financial system. State regulators, with boots on the ground across the country, will also continue to police consumer protections in the insurance sector.

The final measure awaits approval from both the House and Senate.