The National Insurance Act of 2006 (S.2509) would radically restructure the current system of state insurance regulation by establishing a federal insurance regulatory authority. Both the National Governors Association (NGA) and the National Conference of State Legislatures (NCSL) oppose the legislation. The National Association of Insurance Commissioners has weighed in against the proposed federal legislation as well.
“The nation’s insurance officials strongly believe that a coordinated, national system of state-based insurance supervision has and will continue to meet the needs of the modern financial marketplace, while enhancing individual and commercial policyholder protections,”, stated the NAIC president, Alessandro Iuppa. Leonard C. Brevik, executive vice president and CEO of the National Association of Professional Insurance Agents, also expressed opposition to the legislation. In an interview before the National Conference of Insurance Legislators, Brevik stated that “[t]he National Insurance Act of 2006 would undermine key insurance consumer protections, constrict the availability of insurance, create market instability and prompt a flood of litigation”.
At issue is the ability of insurer to avoid regulation by the various States. For example, a provision of the proposed legislation provides:
(c) Activities of Federally Licensed Insurance Producers- No State may–
(1) by statute, regulation, order, interpretation, or otherwise, prevent or restrict a federally licensed insurance producer from selling, soliciting, or negotiating insurance in such State on behalf of a National Insurer, State insurer, or United States branch of a non-United States Insurer; or
(2) require such producer to be licensed by reason of engaging in such acts on behalf of a National Insurer, State insurer, or a United States branch of a non-United States Insurer.
Another provision of the proposed legislation relating to reinsurance provides:
No State may prevent a State insurer from–
(1) ceding insurance to a National Insurer or a federally licensed reinsurer; or
(2) establishing an asset or reducing its liabilities as a result of such reinsurance to the same extent as the State would allow such insurer if the insurance were ceded to another State insurer.
The bill is sponsored by Senator John Sununu (R-NH) who claims that:
â€œStreamlining an overwhelming and tangled web of state rules for financial regulation, licensing, policy forms, rates, and market conduct exams under an â€˜optional federal charterâ€™ system will encourage greater competition. Moreover, new and innovative insurance products will become available to the consumer more quickly.â€
See, Sununu Press Release.