State Government Officials Oppose Optional Federal Charter

Leading state government officials recently issued statements opposing proposals to create an optional federal system of insurance regulation as an alternative to the current multistate system. Both the National Association of Insurance Commissioners and the National Conference of Insurance Legislators praised state-based insurance regulation and criticized calls for an optional federal charter (OFC) for companies and agents.

In a February 15 letter to the President of the American Insurance Association, NAIC President and Kansas Insurance Commissioner Sandy Praeger expressed some of the NAIC’s reasons for opposing the creation of an OFC. Commissioner Praeger pointed to the success of state-based regulation in protecting local consumers and warned of the dangers state regulators see in a federal system. Commissioner Praeger questioned whether the federal government could replicate the work of 50+ insurance departments nationwide, cautioned that federal oversight may be far less comprehensive than the current state-based system and suggested that federal regulation would eventually put critical state premium tax dollars at risk.

Consistent with the NAIC letter, the National Conference of Insurance Legislators (NCOIL) adopted a model state resolution opposing OFC legislation at its spring meeting this week. NCOIL is an organization of state legislators whose main area of public policy interest is insurance legislation and regulation. The NCOIL resolution touted recent state regulatory modernization efforts and warned that federal regulation could undermine state-based consumer protection.

NAIFA is open to considering all reform proposals that improve the insurance regulatory landscape for NAIFA members and is neutral on the current OFC legislation.

• Read Commissioner Praeger’s letter at www.naifa.org/advocacy/documents/naic_ofc_02152008.pdf

• Read the letter Commission Praeger responded to, from Marc Racicot, President of the American Insurance Association, at www.naifa.org/advocacy/documents/aia_ofc_02132008.pdf

• You can read the NCOIL Resolution at the NCOIL website, at www.naifa.org/advocacy/documents/ncoil_02292008.pdf

To learn more about NAIFA’s position on insurance regulatory reform and OFC, visit the insurance regulatory reform section of NAIFA’s website at www.naifa.org/advocacy/irr  

To hear NAIFA experts discuss insurance regulatory reform topics, listen to the NAIFA GovPod series on this issue at www.naifa.org/govpod

• March GovPod – NARAB II
• February GovPod – The State of State Insurance Regulation
• January GovPod – Optional Federal Charter

NAIFA Staff Contact: Bill Anderson, Senior Vice President, Law & Government Relations, wanderson@naifa.org or 703-770-8193; Jill Edwards, Director, Federal Relations, jilledwards@naifa.org or 703-770-8158; Michael Gerber, Vice President & General Counsel, mgerber@naifa.org or 703-770-8190.