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Laws Promulgated
NAMIC Says Uniformity Possible Without OFC
August 15, 2008Washington - The National Association of Mutual Insurance Companies (NAMIC) is pressing its case that it is possible to streamline and improve the current insurance regulatory system without launching a complete overhaul.
Testifying before the Senate Committee on Banking, Housing and Urban Affairs, Chuck Chamness, NAMIC’s president and CEO, said reforming the current state-based regulatory system is best for insurance consumers and companies. Chamness said the current regulatory system is not so in need of repair as to warrant a federal takeover. “The property/casualty insurance industry has never had a taxpayer bailout,” he said. “The same cannot be said for other divisions of the financial services industry that are regulated by the federal government.
Specifically, Chamness said NAMIC supports legislation to create an Office of Insurance Information (OII), as long as it is accompanied by the strongest confidentiality and privilege protections, is limited in scope, has a well-balanced advisory panel with limited preemptive authority and is subject to congressional oversight.
The bill to create an OII, H.R. 5840, was introduced by Rep. Paul Kanjorski, D-Pa., in June. “Representative Kanjorski’s bill addresses two key points raised by proponents of an OFC: assuring that information on the insurance industry is available to the federal government–especially in times of crisis–and providing a process for agreements on international trade,” Chamness said. “Therefore, we believe the establishment of an OII diminishes the argument for an OFC.”
Chamness also touted H.R. 1065, the Nonadmitted and Reinsurance Reform Act of 2007, to modernize the regulation of nonadmitted insurance and reinsurance companies, and H.R. 5611, the National Association of Registered Agents and Brokers Reform Act or NARAB II, which would establish licensing reciprocity for insurance producers that operate in multiple states.
Source: NAMIC
NAIC Backs Bond Insurance Act
August 15, 2008Kansas City, Mo. —The National Association of Insurance Commissioners (NAIC) is praising H.R. 6308—The Municipal Bond Fairness Act.
Introduced by Financial Services Committee Chairman Barney Frank (D-Mass.), the legislation seeks to ensure uniform and accurate credit ratings for municipal bond issuers and to provide the federal government with a mechanism to monitor systemic risks without unduly impeding on state insurance regulation.
“Indeed, H.R. 6308 seeks to partner with state insurance regulators and the NAIC without imposing unnecessary or redundant federal preemptions,” says NAIC President and Kansas Insurance Commissioner Sandy Praeger. “Most important, the bill explicitly affirms state-based insurance regulation.”
Frank’s legislation authorizes the U.S. Treasury to collect data on financial guarantors (i.e., bond insurers) from the NAIC, state insurance regulators and other sources for the purposes of monitoring their safety and soundness. The bill includes privacy provisions for proprietary data, and it requires Treasury to report on the state of the bond market to the U.S. Congress every year.
“As we’ve testified before Congress,” Praeger adds, “we believe it’s appropriate for an agency within the federal government to work with state regulators—to gather information that will provide Congress with access to data that will identify macroeconomic trends or potential systemic risks.”
Source: National Association of Insurance Commissioners
Life Insurers Applaud Anti-Stoli Legislation
May 18, 2008Washington, D.C. — Life insurers are applauding the signing of legislation intended to curtail a fraudulent use of life insurance called stranger-originated life insurance (STOLI).
Iowa Governor Chet Culver recently singed the bill, (S.F. 2392), which is intended to provide protection to senior citizens. In STOLI transactions, investors or their representatives induce seniors to purchase life insurance for the sole purpose of selling the death benefits to the investors. The investors plan to profit when the seniors die, and the sooner the seniors die, the higher the profit. In most cases, the seniors who sign the policy applications must mislead the insurance company about their intention to sell the policy to the investors. Seniors who participate in these schemes may face unexpected taxes and fees, loss of privacy and legal concerns.
“Life insurance was never intended to be an investment tool for hedge funds,” says Frank Keating, president and CEO of the American Council of Life Insurers. “It is designed to protect families and businesses. This legislation will help set things right.”
Source: American Council of Life Insurers
Kansas Adopts Rate Modernization Bill
May 18, 2008Topeka, Kan. — The Governor of Kansas, Kathleen Sebelius (D), signed into law a rate modernization bill (HB 2689) for personal lines of insurance. Proponents say the law’s centerpiece—flex band rating—will foster competition in both the homeowners and auto insurance markets and offer more choices for consumers.
Flex band rating systems have been used in states such as Louisiana and South Carolina to provide insurers with a more streamlined rating system. Flex band rating permits insurers to file rate increases or decreases of less than 12% with the actuarial staff of the Kansas Insurance Department (KID). KID still has the power of review and approval if the insurer’s rate is actuarially justified. Only actuarially justified rates may be approved. This allows smaller rate filings to be regulated through a streamlined actuarial administrative process.
Kansas Insurance Commissioner Sandy Praeger wrote a letter in support of this bill during the legislative session.
Source: American Insurance Association
New Suitability Model Rule Approved
April 7, 2008Washington – The North American Securities Administrators Association (NASAA) has approved a new model rule prohibiting the misleading use of senior and retiree designations.
“We detected a growing problem for senior investors and have responded to it aggressively with a regulatory solution,” says Karen Tyler, North Dakota securities commissioner and president of NASAA. “I urge all NASAA members to adopt this model rule within their jurisdictions as soon as possible.”
The use of a senior designation by salespersons, whether registered or not, confers an impression that the salesperson has special qualifications or specialized education in addressing the needs of senior citizens or retirees, particularly in the areas of finance, financial planning, estate planning or investing. The model rule prohibits the misleading use of senior and retiree designations while also providing a means by which a securities administrator may recognize the use of certain designations conferred by an accredited organization. NASAA worked with the Securities and Exchange Commission (SEC) to develop the new rule.
“Fraud against seniors robs dreams, destroys lives and erodes the very trust on which our markets depend,” says SEC Chairman Christopher Cox. “This national approach to senior designations at the state level will make it easier for honest firms to help their aging customers, while making it harder for fraudsters to rob our parents and grandparents of their financial security.”
Source: North American Securities Administrators Association
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