Federal Federal Insurance Insurance RegulationRegulation

November 13, 2007November 13, 2007CAS Annual Meeting, Chicago, CAS Annual Meeting, Chicago,

IllinoisIllinois

S. 40 / H.R. 3200S. 40 / H.R. 3200

Provides option for P&C and Life Provides option for P&C and Life insurers to obtain a federal charter insurers to obtain a federal charter and be federally regulatedand be federally regulated

Federal option to be available for Federal option to be available for agents and brokers as well, but not agents and brokers as well, but not for Health insurersfor Health insurers

Federally chartered insurers can Federally chartered insurers can choose to switch back to a state choose to switch back to a state licenselicense

S. 40 / H.R. 3200S. 40 / H.R. 3200

Establishes Office of National Insurance Establishes Office of National Insurance in the Treasury Departmentin the Treasury Department

Commissioner of National Insurance Commissioner of National Insurance appointed by the President for a five-appointed by the President for a five-year termyear term

Office of National Insurance will have Office of National Insurance will have six branch officessix branch offices

Office of National Insurance funded by Office of National Insurance funded by National InsurersNational Insurers

S. 40 / H.R. 3200S. 40 / H.R. 3200

P&C insurers not subject to rate or P&C insurers not subject to rate or price regulation; forms must be price regulation; forms must be available for inspectionavailable for inspection

Lack of rate and price regulation Lack of rate and price regulation means McCarran-Ferguson limited means McCarran-Ferguson limited anti-trust exemption no longer anti-trust exemption no longer appliesapplies

S. 40 / H.R. 3200S. 40 / H.R. 3200

Legislation covers many aspects of Legislation covers many aspects of the business of insurance, including the business of insurance, including financial regulation, market conduct, financial regulation, market conduct, unfair trade practices, receivership unfair trade practices, receivership and liquidation, and mergers and and liquidation, and mergers and acquisitionsacquisitions

In many areas, the Commission is In many areas, the Commission is directed to start with NAIC model directed to start with NAIC model laws and regulationslaws and regulations

S. 40 / H.R. 3200S. 40 / H.R. 3200

National insurers still pay state premium National insurers still pay state premium taxestaxes

They participate in state guaranty funds as They participate in state guaranty funds as long as they meet “safety and soundness” long as they meet “safety and soundness” standardsstandards

They must follow state “compulsory They must follow state “compulsory coverage” laws and must participate in coverage” laws and must participate in state residual market mechanisms, but the state residual market mechanisms, but the state cannot prescribe the prices chargedstate cannot prescribe the prices charged

They must participate in state mandated They must participate in state mandated statistical or advisory organizationsstatistical or advisory organizations

S. 40 / H.R. 3200S. 40 / H.R. 3200

Insurer choosing to remain state-Insurer choosing to remain state-licensed continues its rights and licensed continues its rights and obligations in the state system as if obligations in the state system as if the federal system did not existthe federal system did not exist

The bill does federalize certain The bill does federalize certain aspects of surplus lines insurance to aspects of surplus lines insurance to eliminate multi-state premium tax eliminate multi-state premium tax issuesissues

Federal Insurance Federal Insurance RegulationRegulation

Neil Alldredge, Vice President-State Neil Alldredge, Vice President-State & Regulatory Affairs, NAMIC& Regulatory Affairs, NAMIC

Deirdre Manna, Vice President, Deirdre Manna, Vice President, Industry & Regulatory Affairs, PCIIndustry & Regulatory Affairs, PCI

J. Kevin A. McKechnie, Executive J. Kevin A. McKechnie, Executive Director, ABIADirector, ABIA

Michael McRaith, Director, Illinois Michael McRaith, Director, Illinois Division of InsuranceDivision of Insurance

Casualty Actuarial SocietyCasualty Actuarial Society1100 North Glebe Road, Suite 6001100 North Glebe Road, Suite 600

Arlington, Virginia 22201Arlington, Virginia 22201

www.casact.orgwww.casact.org