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The McCarran-Ferguson Act clearly lays out that Congress intended for insurance companies and products to be regulated at the state level. In 1999, the Gramm-Leach-Bliley Act “once again affirmed that states should regulate the business of insurance by declaring that the McCarran-Ferguson Act remained in effect.” Even the Dodd-Frank Act kept “the primary state insurance regulatory functions” intact. In 2014, Congress enacted bipartisan legislation explicitly protecting insurance companies from being subjected to federal banking rules and capital requirements.

Recently, there has been a misguided effort to apply bank regulations uniformly to insurance companies operating in the U.S. State insurance rulemaking has primarily been ceded to a nongovernmental standard-setting organization known as the National Association of Insurance Commissioners (NAIC). The Biden Administration and intergovernmental organizations composed of foreign regulators, such as the International Monetary Fund (IMF) and the International Association of Insurance Supervisors (IAIS), have influenced the NAIC—pressuring it to single out certain insurance companies. 

The Financial Stability Oversight Council (FSOC), Federal Insurance Office (FIO), and IMF are pressuring the NAIC to pursue heavy-handed regulations. The FSOC and IMF both published reports highlighting their concerns with private equity’s exposure to life insurance. The FIO, which is housed within the U.S. Treasury Department, is working with NAIC to collect climate risk data from insurers. The FSOC is led by President Biden’s Treasury Secretary and is composed of President Biden’s agenda-driven financial regulators. Additionally, the U.S. representative on the IMF’s Executive Board is a Biden nominee.

Liberal Biden officials, such as FIO Director Steven Seitz, are colluding with global regulators to promote their political agenda. Insurance commissioners should not use left-wing talking points to increase burdensome regulations when there is no evidence to justify certain proposed regulations. 

The Biden Administration also uses agencies such as the Department of Labor to undermine certain life insurance companies and deter them from investing in certain tranches of asset-backed securities and collateralized loan obligations (CLOs). Using regulation to box out competition and pick winners and losers is pure rent-seeking behavior that is anathema to free market policymaking. This makes life insurance and annuities less affordable and undermines the 200,000 middle market firms in the U.S. that rely on secondary market liquidity to receive financing. Together, these businesses “represent one-third of private sector GDP, employing approximately 48 million people.” Credit cards, auto loans, mortgages, student loans, and artificial intelligence also rely on securitization investments to boost financing—increasing affordability and access for consumers. Deterring certain insurance companies from investing in securitizations will likely reduce or eliminate lines of credit and consumer financial products. This government mandated intervention should not be tolerated. 

The Federal Reserve (Fed), NAIC, FIO, and state insurance departments are all members of the IAIS. Not only is the IAIS actively promoting DEI/ESG principles, but they are encouraging insurers to incorporate DEI and ESG standards it into how they “conduct their businesses.” DEI is one of IAIS’s main strategic priorities. Similarly, the NAIC promotes DEI as a priority of their own. A new legislative framework is needed to ensure that the NAIC does not impose arbitrary DEI/ESG regulations on U.S. insurers. 

It is also concerning that the chair of the IAIS’s policy development committee works at the Fed. It stands to reason that this Fed employee could be driving the IAIS to recommend policies that regulate insurance companies like banks. IAIS and other intergovernmental organizations should not be in the business of coercing U.S. regulators while circumventing the will of elected officials in Congress and state legislatures. Consequently, ATR proposes legislation to hold the NAIC accountable and rein in its overreach. 

ATR is proposing legislation to hold the NAIC accountable for its arbitrary regulatory proposals. These proposals are hamstringing insurance innovation across the U.S. The goal is to apply the principles of the Administrative Procedure Act to the NAIC. This will eliminate the adoption of arbitrary and capricious proposals that lack data and empirical evidence. 

The bill would state that in order to adopt a proposal created by or on behalf of the NAIC, insurance commissioners would be required to receive a thorough cost-benefit analysis and a quantitative impact study. The analysis and study would have to be submitted to a legislative body and appropriate committees. Both an analysis and study must be produced. If either one is missing, insurance commissioners may not adopt the NAIC proposal. Legislative committees may call for hearings to discuss NAIC proposals. 

The analysis and study must be produced by an accredited, independent, third-party entity. Once the analysis and study are published, stakeholders shall be given at least 90 days (not including holidays) to comment. The NAIC may issue a final proposal, which will be submitted to the appropriate legislative body. If the third-party analyses and studies find that the proposal fails to offer material pecuniary benefits to consumers and the broader economy, the proposal will be nullified.