FEEDBACK // LETTERS TO THE EDITOR
Most insurance
companies
see policies.
based on factors unrelated to regulatory
performance, including “mutual back-scratching” among regulators, the NAIC,
and state insurance departments.
At stake here are wider implications.
When promulgated as accreditation
standards, laws like risk-based capital,
fronting, credit for reinsurance, and the
NAIC’s Non-Admitted Insurers Act can
determine who and under what conditions insurers and reinsurers will do
business in the U.S. The standards are
promulgated by a private association operating without the public accountability
or due process standards to which state
legislatures and Congress are subject,
and with seemingly no restriction on
potentially illegal collusive activity.
Moreover, the NAIC accreditation
program profoundly affects state legislative processes; the staffing and regulatory conduct of insurance departments;
the costs and commercial conduct of
domestic insurers; access of insurance
consumers to alternative insurance facilities and alien insurers; and ultimately
the cost and availability of insurance
products. Yet this tremendous influence
is exercised by a private trade association composed of commissioners whose
average tenure in office is less than
three years and whose operation is often
dominated by staff and a few officials
who remain in office longer than other
commissioners.
The sanction component of the NAIC
accreditation program mandating the
non-acceptance by accredited states
of examinations performed by non-
accredited domiciles, places intended
hardship on all of a non-accredited
state’s insurers, who are subject to
duplicative and expensive examina-
tions. Such a refusal to accept an
unaccredited state’s examinations may
have nothing to do with the integrity of
a non-domiciliary state examination
of that insurer; thus for example if a
captive domicile loses its NAIC ac-
creditation because of how it regulates
risk retention groups, all that state’s
licensed insurers, whether or not
RRGs, would face the concerted re-
fusal of accredited members to accept
that state’s examinations, even if the
non-accredited state used accredita-
tion standards to examine traditional
insurers. This undoubtedly constitutes
a boycott as defined in the U.S. Su-
preme Court decision of Hartford Fire
Insurance Company vs. California. That
the NAIC is not an entity with anti-trust
immunity was established in Preferred
Mutual Risk Retention Group vs. Cuomo.
Jon Harkavy
Potomac, MD
