23rd Annual RIMS Southeastern Regional Conference: Federal vs. State Regulation
Christine, Brian, Risk Management
Since the insurance industry continues to rage over regulation, it is no small wonder that the first general session of the 23rd Annual Southeastern Regional Education Conference presented a panel debate over the choice between federal or state solvency standards. As Paul Brown, director of government and public affairs and general counsel for RIMS, stated, "The debate over state vs. federal regulation of the insurance industry has often been described as the choice between 50 monkeys and one gorilla...I see it more as the choice between 50 poodles and one doberman; the poodles look great, but they just don't have much bite." Mr. Brown presented the case in favor of federal regulation, pointing to RIMS April 1992 public endorsement of a federal regulatory role in the insurance industry. "Large companies should not have to jump through 50 regulatory hoops. Federal regulation would allow transactions between large commercial insurers and large commercial insureds to pass state regulators by."
Mr. Brown believes the National Association of Insurance Commissioners (NAIC) is losing sight of large commercial insureds and the reality of the marketplace. "We can't make it clear to the state insurance departments how important captives are to large insurers," he said. "State departments often see anything new in the insurance marketplace as a threat. If they can't regulate it, they don't like it." In closing, Mr. Brown said although the current bill for federal regulation (H.R. 4900) needs work, it would be an improvement over the current system of state regulation.
Conversely, David Brummond, vice president and assistant general counsel of the National Association of Independent Insurers (NAII), argued in favor of state regulation. According to Mr. Brummond, the NAII issued a report last April on the health of the state system. The results of the two-year study revealed that "the state system is structurally sound, but needs major changes to make it more efficient and responsive. …