Testifying before the House Financial Services Committee on the proposal to create an Office of National Insurance (ONI), the NAIC stated its support of the concept of increasing knowledge and access to information on insurance at the federal level. However, a proposed federal insurance office should most appropriately be a tool to connect the state regulatory system with the federal regulatory system, and not be an instrument to displace or diminish state insurance regulation.
“A formal federal interface is appropriate, but the current ONI proposal strays too far from past legislation that included important safeguards against preemption of state laws and consumer protections,” said Therese M. Vaughan, Ph.D., NAIC Chief Executive Officer.
Vaughan cautioned that while the proposed reform would increase insurance knowledge and expertise at the federal level and enhance international cooperation on regulatory matters, it could also encroach upon state insurance regulatory authority to an unacceptable degree, particularly in the area of federal preemption of state law.
“Any binding discussion at the international level should respect and reinforce the states’ authority to regulate insurer solvency and protect insurance consumers, and therefore should be limited to agreements of regulatory equivalence or mutual recognition,” Vaughan testified.
“It is critical that the federal government have access to insurance information in order to ensure that the United States is competitive with its foreign counterparts in global negotiations,” said Roger Sevigny, NAIC President and New Hampshire Insurance Commissioner. “At the same time, any state-federal regulatory cooperation agreement must leverage the successful state insurance regulatory system and not preempt state law except in extremely narrow circumstances.”