Porter Ch. 4: Roles of State Regulators / NAIC Flashcards
Legislative Branch
Enacts statutes resulted in statutory law
Executive Branch
DOI enforces state code; Attorney General provides legal advice; administers and enforces law; law is administrative law
Judicial Branch
Adjudicates disputes resulting in case law
Typical state insurance regulatory system
Licensing requirements
Reporting/filing requirements
Periodic examinations
Power to impose sanctions
State Legislatures as Insurance Regulators
Directly control DOI budgets
Pass the laws commissioners must enforce
NCOIL
Educate, mediate, improve regulation, asserting legislators’ prerogative in making policy
NCSL
Main purpose is to inform legislators about insurance
DOI Annual Reports
Commissioner summarizes activities of department and status of industry in state
Requirements of DOI Annual Reports
Statement of income and expenses of DOI; insurers closed that year and in receivership; summary of financial status and business transactions; fraudulent claims
Legislative insurance through noninsurance laws
Truth in Lending Act Contract Law Premiums Fraud Investments Lobbying
NAIC fundamental insurance regulatory objectives
Protect public interest Promote competitive markets Facilitate fairness Promote reliability and solvency Support and improve state regulation (Instituted uniform financial reporting)
NAIC staff support for state insurance regulators
Expert advice Publications about insurance issues Valuing securities Scrutinizing alien E&S insurers Track insurance issues at federal level
Model law objective
Help legislative bodies streamline legislative development process
Model law benefits
Help guide states in adopting same or similar laws, regulations, and guidelines; states can adopt or modify
Benefits of legal uniformity among states
Licensing standards, pricing, coverage requirements; less costly for multistate insurers
Model Laws, Regulations, and Guidelines
Includes record of whether state government has taken action
Reasons for rejection / non-acceptance of model laws
Inappropriate or unnecessary
Modified to meet states’ particular needs
May see NAIC model law as just another agenda item
Financial Accreditation of DOIs
Request review by NAIC
NAIC review team visits
Review team meets with Financial Regulation Standards Accreditation Committee
Yes or make required changes and restart
NAIC review team
Interviews, review laws, prior exam reports, inspecting regulatory files, reviewing organizational and personnel policies, gain understanding of document and communication flows
Criteria to be Financially Accredited
Laws/regulations must meet basic standards of NAIC models
Acceptable regulatory methods
Adequate department practices
Concerns with NAIC accreditation program
Budget out of hands of NAIC
Resentment with legislators who believe this goes over their head
Revisions by NAIC creates continual need for new legislation
Techniques used by DOIs or NAIC in regulating solvency
RBC ratio
IRIS ratios
Financial exams
Model law
To streamline regulatory process, NAIC drafts model laws and state regulators modify or adopt as is
Model law benefits, states
Streamlines legislative process
Saves time and money
Helps for accreditation
Easier to pass law
Model law benefits, insurers
Compliance with multiple states less costly if standards are uniform
Alleviates insurers from excessive costs for filing
