SYSTEMIC RISK: FOCUS OF NAIC CEO'S CONGRESSIONAL
Vaughan Offers Regulatory
Perspective, Assistance, Expertise
WASHINGTON, D.C. (March 5, 2009) - National
Association of Insurance Commissioners (NAIC) Chief Executive
Officer Therese M. (Terri) Vaughan, Ph.D., testified today regarding
insurance regulatory modernization and financial stability
regulation during a hearing titled, "Perspectives on Systemic Risk."
Dr. Vaughan offered the NAIC's assistance and expertise to
Congress as it tackles the enormous challenge of developing
legislative solutions to the current financial crisis.
"The NAIC is a full partner with Congress and the Administration
in seeking ways to improve the financial regulatory system and
promoting financial stability," Dr. Vaughan told members of the
U.S. House Financial Services Committee's Subcommittee on Capital
Markets, Insurance, and Government Sponsored Enterprises. "The
state-based insurance regulatory system is one of critical checks
and balances. We have a long history of consumer protection,
conservative solvency oversight and market stability. Any system of
financial stability regulation can, and must, build on this proven
Dr. Vaughan highlighted a series of principles that insurance
regulators have developed regarding systemic risk regulation,
- Primary role for states in insurance regulation;
- Formalization of regulatory cooperation and communication; and
- Group supervision of holding companies
Specifically, the principles provide for sharing of information
and formal collaboration among all financial regulators; development
of best practices for systemic risk management; and preemption of
functional regulatory authority only under extraordinary
circumstances. Insurance regulators believe these principles must be
incorporated into any comprehensive systemic risk system.
"Any framework established to regulate financial stability must
integrate, but not displace, the successful state-based system of
insurance regulation," Dr. Vaughan said. "For more than 150 years,
state insurance regulators - working together with state legislators
- have continued to improve, enhance and modernize state-based
insurance regulation for the benefit of consumers and industry
Dr. Vaughan also stressed the need to bring the best regulatory
minds to bear on the challenges ahead, and pledged the NAIC's
ability and willingness to serve as a resource as Congress navigates
and analyzes the current financial landscape.
to view the full text of Dr. Vaughan's testimony.
Dr. Vaughan served as Iowa Insurance Commissioner from 1994 to
2004. In that position, she served under the administrations of both
major parties and was the longest-serving commissioner in Iowa's
history. She was an active member of the NAIC, serving as president
in 2002. Prior to being named CEO of the NAIC in February 2009, Dr.
Vaughan was the Robb B. Kelley Distinguished Professor of Insurance
and Actuarial Science at Drake University.