SEVIGNY: ROYCE-BEAN BILL STRIPS STATES OF
Legislation Would Let'Fox Guard Henhouse'
WASHINGTON, D.C. (April 2, 2009) - National
Association of Insurance Commissioners (NAIC) President and New
Hampshire Insurance Commissioner Roger Sevigny today issued the
following statement regarding proposed legislation that provides for
an optional federal charter for insurers and insurance
"It is unfortunate that this idea keeps getting recycled.
Congress has rejected this kind of thinking time and again.
This is not a reform bill, it is a deregulation bill - aimed at
stripping the states of insurance oversight authority and denying
consumers of the time-tested protections that regulatory power
"If passed, this bill would allow nearly any function of the
so-called national insurance regulator to be carried out by
self-regulatory industry groups, effectively handing the keys of
supervision over to those being supervised. Akin to letting the fox
guard the henhouse, this bill would essentially dismantle existing
state-based consumer protections.
"In light of the current financial turmoil, the American people
have called for strengthened regulatory systems - not abdication of
control to those who are regulated. Indeed, Secretary Geithner and
key Congressional leaders have stated that charter shopping - where
the regulated picks its regulator - should be eliminated in
financial reform efforts.
"In addition, the bill authorizes the formation of a separate
guaranty fund for federally regulated insurers, along with a
requirement that federal insurance offices be set up in all 50
states. This concept is redundant to a more comprehensive national
system already in place: the existing state-based insurance
"As a whole, the business of insurance has not posed systemic
risk to our nation's economy - instead providing a source of
relative calm in an otherwise turbulent time. State insurance
solvency oversight has kept insurance companies stable and protected
policyholders from the worst of the financial meltdown, and state
regulators continue to provide a local response to consumer issues
at no cost to federal taxpayers.
"There are a number of areas of the financial sector that suffer
from little or no regulation; insurance is not one of them. Energy
and resources should be focused on solving the real problems exposed
by our financial crisis, and not focus on the call for deregulation
that has already costs Americans billions of dollars.
"While we agree that reforms are needed, we believe that federal
and state regulators should work together in a way that continues to
protect consumers and promote financial stability. There are areas
in which we might need federal assistance, but that assistance
should streamline the strong state-based regulatory framework - not
supplant it with a new federal bureaucracy.
"To that end, state insurance regulators have outlined for
Congress and the Administration a series of principles for systemic
risk regulation, as it relates to insurance, that we believe must be
incorporated into any system of comprehensive systemic risk
NAIC Principles for Systemic Risk Regulation
State insurance regulators recognize that federal action can
manage systemic risk within the nation's financial marketplace. We
believe such proposals should incorporate the following principles:
- Consumer access to state-based regulatory officials.
- Formalized state and federal collaboration to regulate
- Limited and extraordinary federal financial-stability
regulatory authority, exercised in conjunction with functional
NAIC Principles for Insurance Regulatory Modernization
For 150 years, state insurance regulators have continually
improved and strengthened the state-based insurance regulatory
system. Fresh reforms must incorporate these principles:
- Uniform standards where appropriate; local or regional where
- Continued state responsibility for standard-setting and
enforcement, as well as managing taxes and fees.
- Equal standing for state insurance regulators with other
regulators; formalized collaboration with federal
financial-services regulators and full participation in
information sharing. Collaboration with international insurance
and financial-services regulators on matters related to the
U.S. insurance marketplace.