THE BEAT
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METLIFE FAILS STRESS TEST
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FLORIDA’S SUITABILITY STANDARD
NAIC Standard-Setting Rule Questioned
by Arthur D. Postal
THE NATIONAL ASSOCIATION
of Insurance Commissioners (NAIC) is
being asked to explain the legal reasoning behind its Dec. 19, 2011 decision to
describe itself as a “standard-setting
organization” rather than a trade group.
Rep. Ed Royce (R-Calif.), a senior
member of the House Financial Services
Committee made the request in a letter
obtained by National Underwriter that
was sent to the NAIC on Feb. 28.
“Given the impending Federal Insurance Office report to Congress on the
state of the U.S. [insurance] regulatory
system, understanding precisely what
the NAIC is and how it is governed—and
reconciling the NAIC’s own inherently
inconsistent statements about itself—is
timely and relevant,” Royce said in the
letter.
The decision to change its designa-
tion and to ask for approval of all com-
missioners was
made soon after a
public hearing on
insurance modern-
ization and regula-
tion convened
by the Treasury
Department where
several of those
testifying referred
to the NAIC as
a “trade group,”
which by its legal
definition, it is.
commerce and/or exercising governmental authority under color of law?”
Royce asked.
Royce questioned if, as a 501(c)( 3)
non-profit corporation, the NAIC files
a Form 990, a routine financial statement for non-profits, with the Internal
Revenue Service (IRS). He further asked
that if the NAIC had been formally
exempted by the IRS from filling this
information, if it could provide written
documentation of this exemption, and
explain the need to keep this disclosure
from public scrutiny. (Royce noted that,
legally, the NAIC is a 501(c)( 3) non-profit
corporation.)
A long-time industry trade group
official, when asked for a response to
the Royce letter, said, “These are the
questions that we have been asking for
a long time.
Royce said he is writing the letter, because, “It appears, when it suits
its purposes, the NAIC fends
off questions about its accountability and transparency by arguing that it
is ‘a private group’
that ‘does not have
any regulatory
authority’.” This
position is legally
essential, Royce
noted, since,
under controlling law, no private
group or association
may regulate in the field of interstate
commerce.
Photo © AP Photo/Charles Dharapak
He said that on July 28, 2011 before
National Underwriter Life & Health • April 2012 16
