A number of activities of potential significance have occurred in the implementation of the Dodd-Frank Act:

Surplus Lines Regulation:

  • The Kentucky Insurance Commissioner has proposed a compromise position which would result in the merger of the NAIC sponsored NIMA and the NCOIL sponsored SLIMPACT interstate compacts into a single agreement for the regulation of surplus lines insurance. Many questions remain, including whether such a compromise will be agreed to by the two competing groups, whether the new entity would regulate anything other than premium taxes, and whether the states with the greatest percentage of surplus lines premium tax collections will join such a compact and voluntarily give up a substantial part of their tax revenues.

Systemic Regulation of Companies:

  • The Financial Stability Oversight Council has a final rule exposed for comment addressing the factors and process for the designation of certain non-bank financial companies for supervision and prudential regulation by the Federal Reserve. It proposes a three step process, with all companies with total consolidated assets of more than $50 billion which satisfy one or more of five financial ratios or thresholds satisfying the first step of the process, with no exemption for any industry or type of company.
  • The Federal Reserve and the FDIC have approved a final rule requiring that bank and non-bank financial companies which will be subject to its prudential regulation under Dodd-Frank prepare and submit a “resolution plan,” i.e., liquidation plan, as required by Dodd-Frank.  

Liquidation of Insurance Companies:

  • The NAIC is considering for final approval guidelines for state insurance departments designed to assist departments prepare for the implementation of the receivership provisions of Dodd-Frank as they may apply to insurance companies. Although insurance companies would be liquidated pursuant to applicable state law, the timing of the initiation of a liquidation and certain administrative aspects of a liquidation would occur pursuant to the provisions of Dodd-Frank, and would occur much faster than in liquidations conducted strictly under existing state laws.

Insurance Regulation Modernization:

  • Dodd-Frank requires that the Federal Insurance Office (“FIO”) submit a report to Congress on how to “modernize” and improve the regulation of insurance in the United States, and the FIO has issued a request for comments on that topic. Although the FIO’s Director has testified that his office is not an insurance “regulator” or “supervisor,” the prospect of such a report may cause unease among some advocates of the state regulation of insurance.