This morning, Representatives Melissa Bean, D-Ill., and Ed Royce, R-Calif., introduced the National Insurance Consumer Protection Act of 2009 (“NICPA”) in the House of Representatives. NICPA would establish a new system of federal regulation and supervision for insurers and insurance producers. In a joint statement, Reps. Bean and Royce stated that NICPA “would create a robust federal regulator for insurance to act as an alternative to the antiquated, non-uniform system of state insurance regulators currently in operation.”

NICPA establishes a parallel, national system of regulation and supervision for insurers and producers, which would be similar to the dual banking system. Under NICPA, most insurers and producers would select national or state regulation, charters and licenses. In addition, the NICPA would allow state licensed insurers to convert to a national charter, and conversely, allow national insurers to convert to a state charter. Those insurers and producers choosing national regulation would be regulated by the Office of National Insurance (“ONI”), an independent office within the Department of Treasury. The ONI would monitor national insurers and producers by setting guidelines and overseeing their financial and market conduct. States would maintain responsibility for regulating state-licensed insurers and producers.

Nationally chartered and licensed entities would be regulated primarily by federal law, with the exception of the following state laws: (1) State tax laws; (2) State unclaimed property and escheat laws; (3) State laws related to participation in assigned risk plans and other mandatory residual market mechanisms that are designed to make insurance available to those unable to obtain insurance in the voluntary market; (4) State laws that provide for compulsory coverage of workers’ compensation or motor vehicle insurance; and (5) Participation in state guaranty funds.

Pursuant to NICPA, the Commissioner of the ONI has the authority to place a national insurer into receivership for rehabilitation or liquidation. In addition, NICPA would create the National Insurance Guaranty Corporation (“NIGC”). The NIGC would assume obligations to policyholders for national insurers that become insolvent; however, national insurers would also be required to participate in state guaranty associations.

NICPA would also create a Systematic Risk Regulator. The Systematic Risk Regulator would be responsible for collecting and analyzing information on insurers from all insurance commissioners. The Systematic Risk Regulator will be responsible for making recommendations to the respective state commissioner or the Commissioner of the ONI to mitigate or avoid insurer or affiliate actions that would have serious adverse economic effects. In addition, the Systematic Risk Regulator, in consultation with the Commissioner of the ONI, has the authority to mandate certain “systemically important” to obtain a national charter.

While many industry groups have yet to comment, NICPA has already received support from the American Bankers Association, American Bankers Insurance Association, The Council of Insurance Agents & Brokers and Reinsurance Association of America, as well as opposition from The Property Casualty Insurers Association of America.

We will continue to follow this matter and provide further updates on InsureReinsure.com.

Please click here for a full copy of the National Insurance Consumer Protection Act of 2009.

Please click here for a copy of the National Insurance Consumer Protection Act of 2009 Fact Sheet.