Insurance Regulation: Assessment of the National Association of Insurance Commissioners

GAO discussed the National Association of Insurance Commissioners' (NAIC) capability to establish and maintain an effective national insurance solvency regulation system. GAO noted that: (1) NAIC could not effectively establish such a system, since it did not have the necessary authority to require states to adopt and enforce its standards; (2) empowerment by the states would require each state to legislatively cede part of its authority to NAIC, but even if each state chose to do so, NAIC standing as a regulator would continue to be weak because each state's legislature could subject the ceded authority to revocation at any time; (3) congressional delegation of the regulatory authority necessary to establish NAIC as an effective public regulator could raise constitutional questions, since the NAIC organizational structure was made up of state insurance commissioners; (4) NAIC improved the credibility of insurers' reported financial information; (5) NAIC attempted to improve capital standards by promulgating risk-based capital requirements; (6) NAIC improved its monitoring systems to better identify troubled companies; (7) NAIC established a peer review process to better ensure that regulators more effectively dealt with troubled companies; and (8) NAIC provided states with a variety of automated databases and tools to facilitate company oversight.