Posted on 18 Mar 2009
Testifying on behalf of the National Association of Insurance Commissioners (NAIC), Illinois Insurance Director Michael McRaith provided details on the ongoing successful efforts of state regulators to strengthen and modernize insurance regulation.
“Insurance companies are integral capital market participants and are not immune from the unprecedented global economic turmoil. However, insurers have not caused the turmoil — and, as a whole, the industry is a source of calm in an otherwise turbulent time,” McRaith told members of the U.S. Senate Committee on Banking, Housing and Urban Affairs. “Vigilant, engaged and effective prudential supervision by the states fosters this insurance marketplace stability. We urge caution in any federal initiative that might jeopardize the state-based platform for such oversight.”
McRaith highlighted the strong solvency and consumer protections that have bolstered the insurance industry while under state supervision, reiterating that an optional federal regulator for insurance would lead to regulatory arbitrage and gaps in oversight. McRaith noted that while the states are strongly opposed to a new federal insurance bureaucracy, they have worked proactively with Congress on targeted reforms for licensing insurance producers and improving surplus lines tax allocation, and are working on legislative implementation of a modernized reinsurance framework.
McRaith also discussed state insurance regulators’ principles for support of systemic risk regulation — a necessary and critical element of an improved financial regulatory system — and how state insurance regulation should be integrated, not displaced, by that system.
“The current financial crisis illuminates the need for a collaborative approach to regulation of financial conglomerates and better cooperation among regulators,” McRaith said. “The state-based insurance regulatory system includes critical checks and balances, eliminating the perils of a single point of failure and opaque or omnipotent decision-making. With a fundamental priority of consumer protection — and with a system that has fostered the world’s largest, most competitive insurance market — state insurance regulators embrace this opportunity to build on our proven regime.”