Financial Crisis, Market Conduct Among Hot Topics at NCOIL's Annual Meeting

WASHINGTON, Nov 14, 2008 (A. M. Best via COMTEX) -- AIG | Quote | Chart | News | PowerRating -- The threat of a possible coming round of federal regulation is the headline issue, but for state legislators gathering this week in Duck Key, Fla., disagreements with their own state insurance regulators could spark some heated debate.

The ongoing global credit crunch and the federal bailout of American International Group Inc. will be the focus of several sessions at the National Conference of Insurance Legislators, including a Nov. 22 roundtable on solutions to the financial crisis. NCOIL's Financial Services & Investment Products Committee plans a session specifically on the problems at AIG while the group's Institute for Insurance Policy is hosting a luncheon to educate legislators about credit default swaps and other derivatives products.

"Congress would be best served to look to the state-regulated AIG insurance sectors that held strong rather than to the federally regulated divisions that led to our present crisis on Wall Street. We at NCOIL plan to encourage use of the states' effective mitigation efforts and discourage adding more bureaucracy to a federal system that in large part served as a breeding ground that produced the current crisis," said NCOIL President Brian Patrick Kennedy, a Democratic state representative from Ohio.

But despite their strong objections to federal regulation, NCOIL members also have concerns about recent developments at the National Association of Insurance Commissioners, including the NAIC's proposed Market Conduct Annual Statement plan. Under a transitional plan approved by the NAIC membership in September, 29 states would start reporting company data to a central repository at the NAIC, which, over the next year, would begin to aggregate and analyze the data, develop technological tools for that purpose and assess state-by-state differences in confidential disclosure laws.

NCOIL already has filed objections to the plan, which members believe oversteps state insurance department's statutory authority, and several insurance trade groups likewise have raised concerns about the confidentiality of any data held by the new repository. The issue is expected to be revisited during the NCOIL-NAIC Dialogue scheduled for Nov. 21.

"It's raw-number data, and as far as we're concerned, it doesn't have any context around it, so it can be misused and misinterpreted if it's not put out in the right arena," said Deirdre Manna, vice president for industry and regulatory affairs with the Property Casualty Insurers Association of America. "When the market conduct laws were created, there were confidentiality provisions in the laws. Our thought is that they can't just start giving it out to whomever, because there are state laws saying that the departments can get it from the company, but that they have to hold it confidential."

Among other topics before the conference is a resolution opposing a U.S. Securities and Exchange Commission rule that would define certain equity-indexed annuities as securities products. If adopted, agents who wish to continue selling the annuities would need to become registered representatives overseen by the Financial Industry Regulatory Authority, a status held by only about 55% of those who currently sell the products.

"It's a complicated topic and we're attempting to develop a consensus position, but at this time, we do not have a position," said John Gerni, a senior director of state relations at the American Council of Life Insurers.

NCOIL also is expected to move its proposed Rental Network Contract Arrangements Model Act, which would require third parties to notify preferred provider organizations of so-called "downstream rentals," access to a network and its discounts rented to additional parties.

(By R.J. Lehmann, Washington bureau manager: raymond.lehmann@ambest.com)

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