For state insurance regulators and legislators, insurers and consumers, 2008 may well be remembered as the year of the acronym, with each one having the potential to significantly change the way business is done.
Whether OFC, OII, MCAS or PBR, there is no shortage of opinion on what issues such as an Optional Federal Charter, the Office of Insurance Information, the Market Conduct Annual Statement and Principles-Based Reserving could do to alter the insurance industry. Not to mention what a company acronym, AIG, may mean for the future of insurance regulation.
In 2008 leaders at both the National Association of Insurance Commissioners, Kansas City, Mo., as well as the National Conference of Insurance Legislators, Troy, N.Y., turned much of their attention to bills in Congress that would whittle away at state authority over insurance regulation.
As Sandy Praeger, NAIC president and Kansas commissioner, notes, "It has been a big year. Needless to say, a lot of it has been responding to external pressures."
Praeger maintains that work on making producer licensing more uniform as well as "good, solid oversight" of the insurance units of American International Group, New York, when compared with the federal regulation of the holding company make a good case for the continued need of state insurance regulation.
Additionally, she says, work on moving top NAIC brass to Washington and hiring a new executive director as well as establishing an Office of Insurance Information that would act as a resource to both state and federal regulators will also reinforce the need for continued state regulation. Praeger says the interviewing process for a new NAIC executive director is continuing, with interest in the position being expressed by some regulators and a few state legislators.
Also cited by Praeger are advances on the international front with input from the NAIC at the International Association of Insurance Supervisors, Basel, Switzerland, and over 20 memorandums of understanding with foreign countries.
On the issue of market conduct, Praeger cites the decision by the NAIC to proceed with the market conduct annual statement, although she notes that the issue of confidentiality still needs to be worked out in the coming year.
Another major initiative started this year, she says, was the decision to proceed with the development of a not-for-profit NAIC rating agency maintained by the Securities Valuation Office, a New York-based NAIC arm.
Praeger says companies contacted by the NAIC on this are supportive because managements have said that "AAA" ratings encouraged them to invest in credit default swaps, only to have their own ratings penalized when the investments they purchased were downgraded. The competition will be good for the market, she says.
Praeger also says one of NAIC's achievements this year has been developing closer ties with NCOIL and the National Conference of State Legislatures, Denver. Noting the possibility of greater federal intervention, she stresses that "it serves us all well going forward."
Rhode Island state rep Brian Kennedy, D-Hopkinton, NCOIL's immediate past president, concurs that relations between NCOIL and NAIC have improved as shown by the creation of joint legislator-regulator panels during meetings of both organizations. As evidence of the improved relations, he notes that over 30 legislators attended NAIC's fall meeting in Washington, sponsored with NAIC funding. And that may be repeated at NAIC's Washington meeting in the future, Kennedy says. Commissioners have also been attending NCOIL meetings in greater numbers, he adds.
The push to create more open meetings at the NAIC was another important NCOIL initiative this year, according to Kennedy. Although he notes improvement on the issue, he says there are still many sessions from which attendees and the press are barred.
NCOIL had more of a presence on Capitol Hill in 2008, testifying on issues such as an optional federal charter and an office of insurance information, he adds.
Roger Sevigny, New Hampshire Commissioner and NAIC president-elect, notes NAIC's work in 2008 on regulatory modernization and the support for creating an OII through which NAIC could offer access to data to Congress and other functional regulators.
The market conduct annual statement project adopted in 2008 is part of the effort to modernize insurance regulation at the state level, he says. If the data is collected and developed so it is reliable, it is possible MCAS could be part of the data made available through the new OII effort. But, he stresses that this is only a possibility and would need to receive further discussion as to how feasible it is.
Jim Long, North Carolina commissioner, who is leaving his post at the end of the year after 24 years of service, says the most important point made this year and the one state insurance regulators need to remember is that "we are the ones who are closest to the consumers. We are more attuned to what their concerns are."
He points to FEMA's botched performance after Hurricane Katrina and the way federal agencies regulated holding companies and banks that led to the current financial crisis as examples of how the federal government failed consumers.
Those who are pursuing federal regulation may be like "the dog chasing the car. Once you get the wheel, what do you do with it?" he notes.
