A request by the American Council of Life Insurers (ACLI) to relax US life insurers’ capital and surplus requirements has been rejected by the National Association of Insurance Commissioners (NAIC) executive committee.
A surprise decision, it followed positive recommendation by the NAIC’s surplus working group for six of the ACLI’s nine proposals. The six proposals related to reserving requirements, reinsurance collateral and accounting procedures.
Clarifying the NAIC’s decision, president and New Hampshire insurance commissioner Roger Sevigny said that because of strong state solvency regulations the insurance industry is in far better condition than most of the financial services sector.
“Simply put, the industry has not made a credible case for why we need to make changes on an emergency basis, and why those changes should be limited to the specific proposals made by the industry,” said Sevigny.
“While the working group’s proposals have merit, we believe such adjustments would be better implemented through the NAIC’s standard protocol,” said NAIC vice-president and Iowa insurance commissioner Susan Voss.
She added that the working group’s proposals will be considered by NAIC technical groups and committees.
“In the interim, current state law provides insurance regulators with the discretion necessary to supply measured relief to companies on a case-by-case basis,” said Voss.
Expressing the ACLI’s disappointment, president and CEO Frank Keating said adoption of the proposals would have provided a “financial cushion” and “operational flexibility” demanded by current market conditions.
“It also would have provided more accurate information to the public on the industry’s ability to withstand any further potential downturn in the economy and given consumers what they need to make informed decisions about their financial futures,” added Keating.
Strong approval of the NAIC’s decision came from non-profit association the Center for Economic Justice (CEJ).
“State regulators today showed they can be independent of the industry they regulate,” said CEJ executive director Birny Birnbaum.