U.S. Representative Ed Royce, a California Republican, asked a new federal watchdog to examine the National Association of Insurance Commissioners and determine if the group is overstepping its authority.
The Federal Insurance Office, which was set up within the Treasury Department as part of the Dodd-Frank Act, should study the “nature and scope of NAIC operations” as it recommends how to modernize regulation, Royce said in a letter today to FIO Director Michael McRaith. The group of state insurance commissioners, a private nonprofit, “appears to be engaging in regulatory activity,” Royce wrote.
McRaith has been collecting input ahead of a report to Congress on how to modernize and improve regulation. Life and property-casualty insurers are overseen primarily by state officials who coordinate through NAIC. FIO’s job is to monitor the industry and advise Treasury.
“It is my hope that your pending FIO report on insurance modernization will kick off a comprehensive discussion on the future of insurance regulation,” Royce wrote. “I do not believe that debate can take place without a thorough review of the NAIC and its operations.”
Suzanne Elio, a spokeswoman for the Treasury, declined to comment. The NAIC is aware of Royce’s letter and responded to a previous inquiry from the congressman, Scott Holeman, a spokesman for the group, said in an e-mail. The congressman hasn’t sent any additional request for information, he said.
Royce sent a letter to the NAIC, dated Feb. 28, asking whether its activities amounted to regulation. He cited NAIC services including a system that helps insurers make rate filings to state officials and an office that assesses the credit quality of investments.
“NAIC as a nonprofit corporation does not have regulatory authority, and I am not aware that it has ever presented itself as having such authority,” NAIC President and Florida Insurance Commissioner Kevin McCarty wrote in a March 20 response to Royce’s questions.
McRaith, the former Illinois insurance chief, was chosen last year to lead the office as President Barack Obama’s administration implements the 2010 Dodd-Frank overhaul of financial rules. FIO’s initial report was due in January of this year and has been delayed.
Royce, who sits on the House Financial Services Committee, supported the creation of the FIO and previously sponsored “optional federal charter” legislation under which insurers, similar to banks, could choose national or state oversight.