Therese M. Vaughan, chief executive of the National Association of Insurance Commissioners, recently praised President Obama’s regulatory proposals but added that state regulators still have improvements planned for their oversight.
“The general structure proposed by the administration is consistent with our principles in the sense that it’s collaborative,” she said during a media conference call. “It’s based on regulators’ working together, good information sharing among the different regulators, and it preserves the concept of functional regulations.”
Mr. Obama’s white paper detailing the financial regulatory overhaul proposed the creation of the Office of National Insurance inside the Department of the Treasury, which would develop expertise, gather information and recommend to the
Federal Reserve any insurers that it thought should be supervised as Tier 1 financial holding companies.
The current state-based regime remains intact.
As part of his proposal, Mr. Obama also called for a new Financial Services Oversight Council to oversee systemic risk. Ms. Vaughan said that she thinks that state regulators should play a role in the systemic risk dialogue too.
“When the council was created, that was a mechanism to discuss systemic risks and the policies around them — that’s something that state regulators should be a part of,” she said. “We look forward to working with the administration to find the appropriate way to make that happen.”
But Ms. Vaughan said she is suspicious of the Office of National Insurance’s ability to identify insurers as being systematically risky when they may not be. “The administration needs to be sure they’re not branding companies that are too big to fail and creating a self-fulfilling prophecy,” she said.
No one insurer is too big to fail in the United States, Ms. Vaughan added, stressing that New York-based American International Group Inc.’s problems were outside its insured entities.
The NAIC of Kansas City, Mo., she said, is leery of the proposal to create the Consumer Financial Protection Agency, a regulatory body that would protect customers in the financial-products-and-services area — with the exception of products already regulated by the Commodity Futures Trading Association and the Securities and Exchange Commission.
“In the insurance sector, we always took the perspective that protecting consumers is important,” Ms. Vaughan said.
“We review products before they’re sold,” she said. “Those protections don’t have to and shouldn’t be duplicated by a federal agency.”
Ms. Vaughan said that she thinks that the agency would set a “floor” for consumer safety and that states could go beyond those standards and decide on the appropriate level of protection.
Although the NAIC wants to maintain its structure, she said, she agrees with Mr. Obama’s recommendation that there be increased national uniformity through a federal charter or action by the states.
“We agree with that, and we are working on that to increase uniformity without losing the inherent strength we have in consumer protections and product regulations,” Ms. Vaughan added.
