2014 12 – re: FSOC SIFI Designation of MetLife, Woodall / Hamm – Views of the Council’s Independent Member Having Insurance Expertise – 13p

  • 2014 12 – re: FSOC SIFI Designation of MetLife, Woodall / Hamm – Views of the Council’s Independent Member Having Insurance Expertise  —  [BonkNote] —  13p
  • Roy Woodall – 
  • I do share concerns about some of MetLife’s activities, particularly in the non-insurance and capital markets activities spheres, and in the resulting exposures identified and described in the Council’s Notice of Final Determination in the Company Overview and Exposure Transmission Channel sections.
    • These activities might conceivably pose a threat to the U.S. financial stability under certain circumstances.
    • It is these types of activities that should be fully evaluated under the Second Determination Standard, as opposed to the flawed Council analysis under the First Determination Standard.
  • I do not, however, agree with the analysis under the Asset Liquidation Transmission Channel of the Notice of Final Determination, which is one of the principal bases for the finding under the First Determination Standard.
    • I do not believe that the analysis’ conclusions are supported by substantial evidence in the record, or by logical inferences from the record.
      • The analysis relies on implausible, contrived scenarios as well as failures to appreciate fundamental aspects of insurance and annuity products, and, importantly, State insurance regulation and the framework of the McCarran-Ferguson Act.2
    • The analysis discusses in detail, and is dismissive of, the U.S. State insurance regulatory framework, the panoply of State regulatory authorities, and the willingness of State regulators to act, thereby overstating shortcomings and uncertainties that are inherent in all regulatory frameworks, State or Federal.
  • The Council’s expressed concerns in the Notice of Final Determination as to existing regulatory scrutiny, the State guaranty associations, and the potential complexities associated with the resolution of a large insurance company, seem to me to be unbalanced and lead to distorted conclusions regarding the Asset Liquidation Transmission Channel.
  • In my considered view, the Council should be more transparent about which of MetLife’s activities, together or separately, pose the greatest risk to U.S. financial stability in order to provide constructive guidance for the primary financial regulatory authorities, the Board of Governors, international supervisors, other insurance market participants and, of course, MetLife itself, to address any such threats posed by the company.
  • It is important to identify particular activities in order to encourage appropriate and further action that could lessen any company-specific threat to U.S. financial stability.
    • Paraphrasing what one insurance thought leader once told me: “We should not tolerate any insurance company posing a threat to our financial system – pinpoint what makes them systemically risky and let’s fix them.”3 < 3Therese M. Vaughan, Ph.D., Dean of the College of Business and Public Administration, Drake University, and former Iowa Insurance Commissioner, President and CEO of the National Association of Insurance Commissioners, International Association of Insurance Supervisors Executive Committee member, and Chair of the Joint Forum.>
  • I believe that not pinpointing specific activities that contribute to the company’s systemic risk profile is a mistake.
    • Importantly, rather than confronting the greater burden tied to the Second Determination Standard, it is easier to simply presume a massive and total insolvency first, and then speculate about the resulting effects on activities, than it is to initially analyze and consider those activities.
  • However, the Notice of Final Determination concludes that the origin of the company’s systemic risk would stem from a sudden and unforeseen insolvency of unprecedented scale, of unexplained causation, and without effective regulatory responses or safeguards.
  • I simply cannot agree with such a premise, which is the central foundation for this designation.
  • On February 14, 2013, MetLife announced that it had deregistered as a bank holding company, as approved by the Board of Governors and the Federal Deposit Insurance Corporation (FDIC), after having been supervised by the Board since 2001.5
    • Many of the company’s activities set forth in the Notice of Final Determination developed over this time period.
  • FSB
  • As the Council continues its work, it is my hope that we can concentrate our efforts to consider regulatory reform and improve regulation of those large nonbank financial companies and their activities that have been left largely unexamined since the financial crisis, but that may significantly risk financial instability.
    • The Council’s vigor in evaluating such unexamined (and in some cases unregulated) nonbank financial companies is imperative in successfully fulfilling its charge to identify threats to our financial system, economy, and the American people.
  • Adam Hamm – 
  • To the extent that the Council speculates about such stays leading to further contagion across the insurance industry, insurance regulators have extensive authorities to intervene to protect policyholders at these other firms as well.
  • Moreover, the Basis implicitly assumes material financial distress at all insurance entities at the same time, yet the Basis cites no historical examples of that having ever occurred. <FTC Report, BTID, etc>
  • As for the exposure channel, the Council makes claims that retail policyholders or corporate  customers would suffer losses as a result of material financial distress at MetLife, but does not detail how those losses translate into “an impairment of financial intermediation or of financial market functioning that would be sufficiently severe to inflict significant damage on the broader economy.” <Pacific Lumber>
  • A key consideration for the final designation is the asset liquidation channel.
    • The final Basis, like the proposed Basis, continues to offer merely speculative outcomes related to the liquidation of assets based in large part on hypothetical and highly implausible claims of significant policyholder surrenders. 
    • To remedy this, the Council offers additional analysis in an appendix, but that analysis treats all financial institutions exactly the same using broad-based assumptions regarding asset dispositions that do not take into account the specific characteristics of MetLife, its assets and liabilities, the particular characteristics of insurance products or insurance policyholder behavior.
    • There is no explicit provision for the differences in timing and the assets of MetLife are categorized using bank asset categories even though they are substantially different. 
  • For example, in response to the arguments by MetLife seeking to analogize the impacts of a failure of MetLife to other insurance company failures in history, the Council notes correctly that the failure of an insurance company of MetLife’s size and scope has never taken place.
    • While that is a fair statement as each company has its own unique characteristics, the fact that there is no comparable insurance failure is a testament to the state insurance regulatory system, a fact that the Council ignores.
  • I also take issue with certain arguments that are not firm-specific.
    • For example, the Council raises concerns that a MetLife failure could stress the guaranty fund system.
  • Another example is the Basis’ treatment of MetLife’s Funding Agreement Backed Securities Programs and their impact on money market funds in the event MetLife would be unable to meet its obligations under those contracts.
  • Finally, I would be remiss if I did not mention that, despite the sheer volume of arguments (no matter how far-fetched) contained in the Basis, the Council fails to identify the specific set of legitimate issues of concern that has led to the company’s designation.

Informed Policymakers

  • The Academy views its role in the government relations arena as providing information and actuarial analysis to public policy decision makers so that policy decisions can be made with informed judgment.
  • For example, the determination of required contribution levels to plans to provide benefits and the setting of appropriate reserve levels to meet future obligations are actuarial in nature.

1984 – AAA – Journal, American Academy of Actuaries

  • On behalf of the consumer representatives.
  • Some suggestions to make the advisory committees more relevant to the NAIC include:
    • NAIC could assist consumer groups with technical assistance on selected issues, e.g the concept of consumer actuary.

1993 0302 – Letter – Consumers Union to NAIC Subgroup to Study Advisory Committee Procedures and Protocols – (EX) – NAIC  —  [BonkNote – Subgroup] – Attachment 2 – 

Mary Griffin, Consumers Union, Insurance Counsel, Washington Office

  • In 1994 I was selected as a funded ….
    • In these meetings, groups work consumer representative to the on specific charges they have identified National Association of Insurance or that have been assigned to them by Commissioners (NAIC).
  • In reality, much of what NAIC consumer representatives do to represent consumers is to educate regulators.
    • If regulators learn about issues only by listening to the industry, their knowledge is unquestionably biased.

1997 – AP – What Does it Mean to be a Consumer Representative?, by Brenda Cude – 3p 

  • Federal Insurance Office Act
  • Federal Insurance Expertise.  Insurance plays a vital role in the smooth and efficient functioning of our economy, but the credit crisis highlighted the lack of expertise within the federal government regarding the industry, especially during the collapse of American International Group (AIG) and last year’s turmoil in the bond insurance markets.
    • A Federal Insurance Office will provide national policymakers with access to the information and resources needed to respond to crises, mitigate systemic risks, and help ensure a well functioning financial system.
  • International Coordination.  Although America’s insurance markets still operate on a state-by-state basis, today’s markets are global.
    • The Federal Insurance Office will therefore provide a unified voice on insurance matters for the United States in global deliberations.

2009 06 – DOTT – Financial Regulatory Reform, A New Foundation: Rebuilding Financial Supervision and Regulation, Geithner – [PDF-93p-GooglePlay]

  • We believe it is very important for the subcommittee, and other committees in Congress with jurisdiction over insurance, to have a sound understanding of how our industry operates…
  • … I would like to focus my remarks this morning on why the ACLI believes that the new Federal Insurance Office, FIO, is an extremely important new player in the insurance arena and why it is important for that office to be fully funded and staffed as quickly as possible.  (p26)

— ACLI – Statement of Gary E. Hughes, Executive Vice President & General Counsel, American Council of Life Insurers – Part 1

2011 0728 and 1025 – GOV (House) – Insurance Oversight: Policy Implications for U.S. Consumers, Businesses and Jobs – Part 1 (2011 0728), Part 2 (2011 1025), Judy Biggert (R-IL) – [PDF-285p, VIDEO-?]

NAIC – Origins

  • The first NCIC meeting was held in New York City on May 24, 1871.

2000 – JIR / NAIC – The Early History of the NAIC, Eric C. Nordman – 16p

NAIC – Presidents

1980s

  • 1989 – John E. Washburn – Illinois, Director of Insurance

1990s

  • 1996 – Brian K. Atkinson – Maine, Superintendent of Insurance
    • IMSA
  • 1999 – George M. Reider Jr. – Connecticut, Commissioner of Insurance 

2000s

  • 2002 – Terri Vaughan – Iowa – Commissioner of Insurance
  • 2006 – Alessandro Iuppa, Maine, Superintendant of Insurance
  • 2007 – Walter Bell, Alabama, Insurance Commissioner – (2003-2008)
    • 1983-2003, vice president of the Mutual of New York / MONY / Mutual Life Insurance Company of New York.
  • 2008 – Sandy Praeger, Kansas, Commissioner of Insurance
  • 2009 – Roger Sevigny, New Hampshire, Insurance Commissioner (2002-2018)
    • 2009 0227 – Letter – NAIC, National Association of Insurance Commissioners to Thomas C. Baxter – 2p

2010s

  • 2010 – Jane Cline, West Virginia, Insurance Commissioner 
  • 2012 – Kevin McCarty – Florida Insurance Commissioner 

NAIC - National Association of Insurance Commissioners - WishList

1970s

  • 1973-1 - The Subcommittee heard an interim report from the Price Illustrations Task Force.
    • The report was widely distributed prior to the meeting.
    • Some discussion ensued and a specific presentation was made to the entire Subcommittee by Mr. Robert Seiler.
    • The written document was distributed to the Subcommittee members, but it was decided not to attach the document to the Task Force report.
  • 1973  - Interim Version of the NAIC Life Insurance Buyer's Guide
  • 1973 - Report - McKinsey - Strengthening the system for exercising surveillance over insurance companies - HG 8536 M34 S78 - WishList>
  • 1973 - Report - McKinsey - Improving the efficiency and effectiveness of the system for exercising surveillance over insurance companies - HG 8536 M34 S77 - <WishList>
  • 1974 - Report - McKinsey - Strengthening the surveillance system : Phase 1 report -  HG 8536 M34 S79 1973 - <WishList>
  • 1974 - Report - McKinsey - Strengthening the surveillance system : final report - 126p - naic.soutronglobal
  • 1974 - Report - McKinsey - Improving the property/liability early warning system McKinsey & Company, Inc 1974 HG 8535 M34 S81 - <WishList>
  • 1974 - Report - McKinsey -  Improving the life and health early warning system McKinsey & Company, Inc 1974 HG 8535 M34 S80 - <WishList>

1980s

  • 1981 0811 - Testimony - NAIC - National Association of Insurance Commissioners Task Force on Cost Disclosure - HG 8755 N38 C6 1981 -  https://naic.soutronglobal.net/Portal/Public/en-GB/RecordView/Index/5517 - <WishList>
  • 1982 - New Jersey - Universal/Flexible Factor: life insurance informational hearing
    • Department of Insurance, New Jersey. Department of Banking & Insurance
    • [Bonk: the NAIC has it in their Database, but it is currently unavailable for viewing - KF 1986 U55 - (as of 2023)]
    • Bill White, chief actuary, New Jersey, reported on their special project pertaining to universal life. - <WishList>
    • Their commissioner, on June 25, 1982, declared an 81-day moratorium on "Universal-Flexible Factor" type of policies.
    • His staff was directed to
      • (1) study the matter and issue a position paper on the subject;
      • (2) conduct public hearings on March 10-11;
      • (3) terminate the moratorium April 16 with the publishing of a set of guidelines. - <WishList>
    • Reports and results have been mailed to each insurance department.

  • 1982-2, NAIC Proceedings

  • <WishList> - The 1983 Life Insurance Buyer's Guide prepared by the National Association of Insurance Commissioners - "no Official copy exists"
  • 1983 - NAIC CIPR Library - Universal life insurance regulation workbook National Association of Insurance Commissioners NAIC. (A5) Task Force Industry Advisory Committee - HG 8823 N38 A5
  • 1983-2 NAIC Proc.
    • <WishList> - Mr. Jackson distributed copies of the article "A Regulator's View of Universal Life," by John 0. Montgomery, F.S.A., M.A.A.A., and also a working draft of the Universal Life Insurance Model Regulation, which contained Definitions, Valuation and Non-Forfeiture sections (Attachment Two-A1).
    • <WishList> - Ms. McGrath distributed the New York "Guidelines for Submission and Approval of 'Universal Life' and Other Life Policies" published March 16, 1983.
  • 1988-2,  NAIC Proceedings - <WishList - Survey>
    • Commissioner Hager asked for a report on the result of the survey which was sent over the State Telecommunications Network to all states asking them for identification of any consumer/disclosure concerns over universal life insurance, variable life insurance and any other related interest-sensitive products.
    • Carole Olson (NAIC) reported that at least five states had responded to the message which was sent out on June 4 and that a written report would be presented at the September meeting.

1990s

  • 1990-2, NAIC Proceedings - Troubled Company Working Group of the Examination Oversight (EX4) Task Force
    • Chair - Norman Koefoed, Chair (Ill);
    • (p ) - The Chair notified the task force that a Non-Investment Bonds Working Group had been appointed to review companies with large holdings in non-investment grade bonds.
      • The group had met three times since being organized.
      • The initial concern has been with Executive Life Insurance Company of California.
      • <WishList-x2> - The group has received reports from both an independent actuarial firm and the company and is monitoring the situation.
      • The chair advised that no precipitous action should be necessary against the company.
      • In addition, the group has provided the California Department with a list of recommendations regarding needed information from the company.
      • The chair stated that information provided to the group indicates the company to be in a very liquid position, with surrenders declining as compared to January and February of this year.
      • Mr. Montgomery stated that the Actuarial Valuation Report from Milliman and Robertson should be completed by week end and copies would be available to states from the actuarial firm. - <Wishlist>
  •  1991-1, NAIC Proceedings - 10. Special Report on Executive Life Companies - <WishList>
    • Jim Schacht delivered a special report on the Executive Life Companies.
      • He reported that since January 1990 a special committee has been addressing the situation with regard to Executive Life Insurance Companies.
      • It was noted that the financial evidence reveals that the company is in no imminent financial danger but that precipitous action by any state could create serious problems.
      • After much discussion a resolution that recommends that no state take precipitous action and urges all states to continue to cooperate was drafted and unanimously adopted.
    • 1994 10 - GOV (House - Report) - Wishful Thinking: A World View of Insurance Solvency Regulation - John Dingell (D-MI)  ---  [BonkNote]  ---  [PDF-137p]
  • [PDF-369p-GooglePlay]
    • (p116) - Orin Kramer (KramerAssociates, Information Institute) - In December 1990, just 4 months before Executive Life failed, NAIC issued a statement that Executive Life was and I quote, "in no imminent financial danger."
    • ⇒  <WishList> - NAIC issued a statement that Executive Life was and I quote, "in no imminent financial danger."
    • [Bonk: Also Referenced in:]
      • 1991-1A, NAIC Proceedings (p16)
      • 10. Special Report on Executive Life Companies
        • Jim Schacht delivered a special report on the Executive Life Companies.
        • He reported that since January 1990 a special committee has been addressing the situation with regard to Executive Life Insurance Companies.
        • It was noted that the financial evidence reveals that the company is in no imminent financial danger but that precipitous action by any state could create serious problems.
        • After much discussion a resolution that recommends that no state take precipitous action and urges all states to continue to cooperate was drafted and unanimously adopted.
  • <WishList> - 1997 - NAIC - An Overview of the State Insurance Receivership System, 27 Brief 12, 13 (Fall, 1997), Francine L. Semaya & Lenore S. Marema
    • 2016 0822 - 16-5086 - NAIC - D1631439 - Brief of Amicus Curiae the National Association of Insurance Commissioners in Support of Plaintiff Appellee [MetLife] - MetLife v FSOC - 40p

2000s

  • 2003 0313 - NP - The Washington Post - The Trick to Insurance Is Grasping the Details - [link]
    • A survey last year by the National Association of Insurance Commissioners found that only 28 percent of people with insurance -- life, auto, home, health or disability -- really understood the details of their coverage.  - [link]
    • <WishList - NAIC Survey>
  • 2003 - LC - Fay v Aetna - William Hager - Excerpt - Deposition - Doc 65 - 2p
    • A: William Hager -  Surveys would be to determine - lets take a regulatory survey.
      • Through a regulatory survey, we could efficiently determine and get a read through the regulators in all 50 states as to whether a particular matter, particular issue was in fact a nationwide issue that merited national attention or in fact whether it was a localized issue.
    • Q. So when you say an issue, could an example of an issue be the types Of disclosures that are being made in illustrations?
    • A. Yes.
    • Q. Was that in fact one of the issues that was reviewed?
    • A. Yes. In fact, while was insurance commissioner, I oversaw a survey to that effect.
    • Q. As chair of the life insurance product development task force, you led the development of model disclosure statements for....
    • ⇒  <WishList - Complete Deposition>
    • ⇒  <WishList - NAIC - Hagers Survey from his time as an Insurance Commissioner>
  • Found - Uploaded - 2026 0516 - <WishList> - 2004 - NAIC - Military life insurance sales regulatory response options, Market Regulation & Consumer Affairs (D) Committee, Market Analysis Working Group, HG 8861 N38  
  • 2008 0918 - NAIC - Press Release - The NAIC's press release responding to critics of state-based regulation, titled "AIG: Conversation Should Stay Focused on the Facts" - <WishList>
    • 2008 0926 - CEI - Facts About the AIG Collapse: A Response to the NAIC: An Optional Federal Charter Might Have Impacted AIG's Situation, by Eli Lehrer - 3p
  • 2009 0120 - NAIC - Press Release - NAIC Still in Opposition to Federal Regulation - <WishList>
    • 2009 - LR - Differential Compensation and the "Race to the Bottom" in Consumer Insurance Markets, by Daniel Schwarcz - 33p
  • Case 1:11-cv-00779-TCW Document 258-1 Filed 08/06/14 - 26p
    • 183 - FRB018-00408344 to FRB018-00408345 - Letter - (2/27/2009 12:35 pm) - From: Roger Sevigny (NAIC) - To: Thomas Baxter - re: Meeting between NAIC and FRBNY - <WishList>  - Page 18 of 26

2010s

  • 2010 - <WishList> - See Public Hearing on Insurance Contract Readability Standards Before the NAIC Consumer Connections Working Group for the Public Hearing on Insurance Contract Readability Standards (Mar. 2010) (testimony of Brenda Cude, Prof. of Hous. & Consumer Econ., Univ. of Ga.) (on file with author).
    • 2014 - LR - Transparently Opaque: Understanding the Lack of Transparency in Insurance Consumer Protection, 61 UCLA Law Review 394, Daniel Schwarcz - 69p
  • 2014 0921 (Updated) - WSJ - New York Probes Indexed Universal Life Sales Practices Benjamin Lawsky Concerned Insurance Companies Giving Optimistic Projections, By Leslie Scism - [link]
    • New York's top financial watchdog has launched an investigation into sales practices surrounding one of the hottest-selling products in life insurance, according to a letter from the regulator's office reviewed by The Wall Street Journal
    • [Bonk: <WishList> 1) Lawsky Letter 2) Outcome of Lawsky's Investigation. Any Documents]

NAIC - Groups - Index

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  • Group Solvency Issues (E) Working Group (GSIWG)

AIG – NAIC

  • 2008-3, NAIC Proceedings – AIG Special (E) Task Force Reporting to the Financial Condition (E) Committee
  • 2009-2, NAIC Proceedings
    • AIG Managing (EX) Task Force
    • AIG Life (EX) Working Group
    • Form A (EX) Subgroup
  • Credit Default Swap (EX) Working Group
  • Insurance Regulators – 2008 Financial Crisis
    • 2008 – NAIC President – Sandy Praeger, – Kansas Insurance Commissioner
  • 2008-4, NAIC Proceedings
    • (10-44) – 2008 1111 – International Association of Insurance Supervisors Solvency & Actuarial Issues Subcommittee -Summary of the Bonn Meeting, Nov. 11-13, 2008 – Presented to the NAIC’s International Solvency and Accounting (E) Working Group
      • Joe Fritsch (US-NY) reported about credit default swaps, statutory accounting, and the Solvency Modernization Initiative. He said the NAIC drafted a document that compares the US solvency system to the proposed Solvency II framework. He said that Edward Liddy (AIG CEO) did a presentation and he described the changes in the AIG agreement.
    • (2-39) – 2008 1204 – NAIC/CONSUMER LIAISON COMMITTEE – Dec. 5, 2008–Grapevine, TX 
      2. Received a presentation on concerns regarding the American International Group (AIG) bailout that focused on the lack of accountability and follow-up regarding potential buyers of AIG.
      3. Received a presentation on transparency and unfair discrimination as it relates to AIG and the current economic crisis.
    • 2008 1205 – OPENING SESSION – 2008 Winter National Meeting – National Association of Insurance Commissioners – 
      December 5, 2008 PRESIDENTIAL ADDRESS Sandy Praeger, NAIC President 
      • (1-4) – ESPRIT DE CORPS AWARD PRESENTATION – Sandy Praeger. NAIC President
        It has been a challenging year in many ways. The pressures for an optional federal charter required a re-energized strategy in Washington. During the AIG situation, the New York State Insurance Department, under the leadership of Superintendent Eric Dinallo, was instrumental in working with Pennsylvania and other states in mobilizing the NAIC’s pursuit of consumer protection. Under Eric’s leadership, members of the New York department serve on many NAIC committees, task forces, and working groups. Most notably, the Life Insurance & Annuities Committee, Financial Condition Committee, Capital Adequacy Task Force, and Receivership & Insolvency Task Force.
        In addition, Eric has testified before Congress numerous times, serving as an outstanding ambassador for state-based insurance regulation, and resources for our colleagues on the Hill.
      • (1-6) – In addition, we have kept busy working with the media on almost a daily basis. Our coordination of the AIG crisis, led by New York and Pennsylvania, was yet another example of the responsiveness of our state-based system. With the challenges facing AIG, and the crisis on Wall Street, we aggressively worked to disseminate timely information to help consumers and reporters make sense of complex issues. I think we surely set a record for the number of national TV interviews done by commissioners in one year.
    • (4-2) – 2008 1205 – Executive (EX) Committee  – 3. Consider Adoption of the Report of the AIG Special Task Force – Commissioner Praeger reported that since the last national meeting, the AIG Special (EX) Task Force has maintained weekly to biweekly calls in executive session to allow all U.S. regulators to be briefed by the New York Department of Insurance regarding the status of the American International Group (AIG) U.S. insurance subsidiaries; details regarding activities of the AIG Holding Company; and activities related to the Federal Reserve. Superintendent Dinallo has also given periodic updates to representatives from international regulatory jurisdictions regarding the status of AIG. Commissioner Bowman made a motion to adopt the report of the AIG Special Task Force. The motion was seconded by Director Hall and passed.
  • 2008-4, NAIC Proceedings – 2008 1206 – Life Insurance and Annuities (A) Committee – (6-2) – 1. Discussion of Replacements – Superintendent Dinallo said he is seeking input from Committee members and interested parties on approaches to address issues related to predatory practices involving replacements. He noted that this issue first arose with the American International Group (AIG) insurance companies, but now is spreading to other insurance companies based on unfounded rumors of insolvency as to those companies. Superintendent Dinallo said the New York State Insurance Department issued a circular letter on the issue, but would like to hear suggestions on approaches to address the problem beyond simply issuing a bulletin or circular. Commissioner Dilweg suggested that the Committee request comments from regulators and interested parties.  Commissioner Voss said Iowa also had issued a bulletin. She noted, however, that the Iowa Insurance Division has not received any complaints regarding replacements. Commissioner Hampton said he had issued a bulletin as well, but has received few complaints. Ron Panneton (National Association of Insurance and Financial Advisors-NAIF A) suggested that the Committee ask companies about their replacement activity. After additional discussion, the Committee decided to request comments from Committee members and interested parties on approaches to address the issue of replacements by Dec. 17, 2008.
  • 2008-4 NAIC Proceedings – 2008 1207 – Government Relations Leadership Council (EX) Task Force – (4-102) – Mr. Sonnichsen (NAIC) mentioned…    After passage of a stimulus package and then a budget, Congress would certainly focus on financial regulatory reform, including insurance, to create accountability for the $700 billion taxpayer bailout program. Insurance might have been an afterthought were it not for misperceptions about the role of insurance and insurance regulation in the turmoil at American International Group (AIG).
  • 2008-3, NAIC Proc. – 2008 0922 – NAIC Proceedings – 2008 Fall National Meeting – National Association of Insurance Commissioners – September 22, 2008
    • (p1-9) – PRESIDENTIAL ADDRESS – Given at Executive (EX) Committee Meeting Sandy Praeger, NAIC President
      • It has been a long week-a lot of hard-won battles.
        • Of course, I am talking about AIG.
      • It was a war on many fronts-the battle to ensure that the solvent, strong insurance subsidiaries wouldn’t become collateral to the financial missteps of the parent holding company.
      • This week we mobilized to ensure that policyholders of the insurance subsidiaries remained protected.
        • We actively participated and aided the efforts to shore up the federally regulated portions of AIG that were under intense stress.
      • Insurance regulators from every state-under the leadership of New York State Superintendent Eric Dinallo and Pennsylvania Insurance Commissioner Joel Ario-have been involved in every step of this process…
      • Remember: The reason for the financial difficulties at AIG was the lack of understanding-through lack of transparency-by the financial holding company regarding the financial instruments it had purchased.
      • State insurance regulators also suggest that federal banking regulators look to state insurance regulation regarding, among other things, restrictions on derivative activities; limits on high concentrations in investment types; and appropriate minimum capital and surplus requirements.
  • 2008-3, NAIC Proceedings
    • 10-236-240 – 2008 0730 – Accounting Practices and Procedures (E) Task Force 09/23/08 – Drafted: 7/22/08  Statutory Accounting Principles (E) Working Group Conference Call – July 30, 2008
      • 1. Security Lending Transactions
        • Mr. Fritsch advised that the purpose of this conference call was to begin discussing the securities lending guidance included within paragraphs 56-59 of SSAP No. 91-Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SSAP No. 91) and obtain information from industry regarding how the guidance is currently interpreted and applied.
        • Ms. Van Beck [AIG] stated that they look at available liquidity and the extent of liquidity necessary for their securities lending program. Although securities are written down for severity (decrease in value), this does not mean that AIG would be forced to sell the investment. Although the loans are short in tenure, she stated that the security lending market is a very large, fungible market and the securities market has held up even with the past year of market disruptions. She noted that by looking at historical experience, AIG can assess the liquidity necessary to maintain the securities lending program.
        • Mr. Smith inquired whether companies make assumptions that security lending transactions will roll-over at the end of the stated period. Ms. Van Beck stated that AIG makes assumptions that they will maintain a certain volume of securities lending and that they will have the ability to do so, Ms, Whitmore stated that the borrower can put the security back at short-notice and retrieve their collateral, thus the issue for assessing impairment is more of the ability to ‘hold to maturity’ and not ‘an intent to sell’. Mr. Smith noted that this is likely where more clarification is needed. Ms. Whitmore stated that one would not typically see an assumption that the security lending transaction would be rolled-over since the counterparty has the ability to return the security and retrieve collateral at short-notice.
        • 10-239 – stated that even in the current market, AIG has not had any forced sales of any of the collateral assets within the past year as they have managed the liquidity in the program. She noted that such transactions open and close on a regular basis and that it seems there are variations between the AIG and CNA securities lending programs.
        • Ms. Marcotte inquired whether the off-balance sheet collateral is invested in admissible assets consistently. Ms. Van Beck noted that AIG is limited to investing the collateral in accordance with an approved investment plan and it can only include investments that they can invest in directly.  Typically, the investment guidelines for the collateral are more restrictive than AIG’s own investment guidelines. It was noted that investments typically fall within the ‘confirming criteria’ required to obtain the lower RBC charge.
    • 2-9 – LIAC – Adopted the Wisconsin OCI insurer bulletin and consumer alert related to replacement solicitations in light of the AIG events.
    • AIG Special (EX) Task Force (Attachment Nine) 4-34
    • 15-3 – 2008 0922 – NAIC/Consumer Liaison Committee
      • 3. Transparency and Public Accountability
        • Birny Birnbaum (Center for Economic Justice-CEJ) and Brendan Bridgeland (Center for Insurance Research) provided a presentation on the transparency and public accountability necessary on behalf of the NAIC. Mr. Birnbaum stated that the failure of American International Group (AIG) was largely due to a lack of public accountability and a lack of transparency in the regulatory environment. Mr. Birnbaum highlighted the following regarding transparency: he urged the NAIC to issue a resolution immediately opposing the AIG bailout and against using it politically to push the need for the Federal Option (Paulsen Plan); he stated emphatically that state regulation was not the cause of the AIG collapse, but that it demonstrates how important it is for states to step up and take appropriate action;
    • 10-390 – 2008 0922 – Reinsurance (E) Task Force
      • Director McRaith suggested that the latest developments in the financial markets, and specifically the AIG situation, would demonstrate the success of state regulators in their role of protecting insurer solvency.
    • 12-2 – 2008 0923 – International Insurance Relations (G) Committee
      • b. Financial Stability Forum
        Commissioner Gross reported that Superintendent Dinallo was invited to participate in the meeting of the Financial Stability Forum on Sept. 29. He was expected to discuss the regulation of financial guaranty insurers and the recent activity involving financial troubles in the AIG holding company.
    • 4-140 – 2008 0924 – Government Relations Leadership Council (EX) Task Force
      • Ethan Sonnichsen (NAIC) ….He also stated that turmoil  at American International Group (AIG) would be politicized as justification for and against federal insurance regulation, but at a minimum, there would be a significant focus on broad financial services regulatory reform in the next Congress. While much of that reform will be aimed at federal regulators, state insurance regulators will certainly be a part of the equation, as insurance is a significant part of the financial and economic landscape.
      • a. Federal regulation/OFC/OII – The Optional Federal Charter (OFC) legislation currently pending in the House and Senate will not move in the current Congress.   Paul Kanjorski (D-PA)
      • Again, given the turmoil at AIG, federal regulation supporters will attempt to spin the situation to justify need for an OFC, or perhaps even a stand-alone federal regulator with no counterpart in the states. While state insurance regulators have clearly performed well with respect to AIG’s insurance  subsidiaries, there is a perception that more coordination is needed to address the problems created by the AIG holding company, so that regulators (whether state or federal) have an enterprise-wide view of complex companies.
    • Wisconsin OCI Draft Replacement Bulletin Related to AIG Events (Attachment Five) 6-43
    • Life Insurance and Annuities (A) Committee Proposed 2009 Charges (Attachment Six) 6-45
    • 6-2 – 2. Discussion of Wisconsin OCI AIG Consumer Alert and Insurer and Insurance Intermediary Bulletin
      • (Dinallo) He also noted that the New York State Insurance Department set up an AIG consumer hotline and received around 1,000 calls the first day.
    • 6-41 – Example – Consumers Urged to be Cautious about Liquidating or Replacing Their Annuities – Wisconsin
      • Consumers should be particularly cautious if they are approached to liquidate annuities issued by an AIG insurance company because of the recent activity concerning AIG Holdings, Inc. 
        • Commissioner Dilweg said, “The AIG insurance companies are separately regulated by state insurance regulators and do not have the financial stress that AIG Holdings, Inc. is experiencing.
    • 6-43 – 2008 0918 – Wisconsin letter to Insurers / Agents
      • You are reminded that you are legally obligated to ensure that AIG Life and Annuity policyholders are not subject
        to misleading, or unsuitable, replacement solicitations.
      • Any strategy to replace life and annuity products of AIG insurers primarily on the basis that they are AIG products will be viewed as an unsuitable replacement. Misrepresentations about the status of these companies in order to induce fear into consumers will not be tolerated and appropriate enforcement action will be taken on those who improperly replace these policies.
    • 10-1 – Solvency Modernization Initiative Group Issues From Dreams to Reality Presented by Charlie Shamieh (AIG) (Attachment Three-C7) 10-60
    • 10-1 – Market Value of Liabilities for Insurance Firms Presented by Charlie Shamieh (AIG) (Attachment Three-C 10) 10-75
    • 10-365-367 – To: Receivership and Insolvency (E) Task Force Members – From: Structured Settlement Advisory Group – Date: September 18, 2008 – RE: Structured Settlements in the Insolvency Context

NAIC – CEO List

  • 2000-2008 – NAIC CEO – Catherine J. Weatherford  
    • ?-? – Insurance Commissioner – Oklahoma
  • 2009-2012 – NAIC CEO – Terri Vaughan 
    • 1994-2004 – Insurance Commissioner – Iowa
    • 2002 – NAIC President 
    • ?-? – Professor – Drake University
    • ?-? – AIG Board
    • ?-? – Principal Board
  • 2013-2016 – NAIC CEO – Ben Nelson
    • ?-? – Insurance Commissioner – Nebraska
    • ?-? – Senator – Nebraska
    • Book – 
  • 2017-? – Current, as of 2022 – NAIC CEO – Michael Consedine
    • content.naic.org/about/michael-consedine
    • ?-? – Aegon, Transamerica, FACI
    • 2011-2015 – Insurance Commissioner – Pennsyvania 
    • ?-Current  (as of 2025 03) –  Athene, Executive Vice President, Head of US Regulatory & Government Affairs
  • 2013 0613 – GOV (House) – The Impact of International Regulatory Standards on the Competitiveness on US Insurers – PDF-164p
    • (p12) – Mr. CLEAVER: What went wrong, and what can you tell me about how we can make sure that nothing like that happens again? Senator?
    • Ben NELSON: I would say that only perhaps in a misunderstood way is AIG looked at as an insurance company problem, because the insurers under the holding company were all solvent, were financially regulated by various States, and there weren’t any problems with stability and solvency with the insurance operations, but the fact that the holding company became a thrift holding company and was subject to other, to jurisdictional regulation at the Federal level, which would have been, I suppose, what they call group or consolidated supervision, but the insurers themselves were all solvent because they were regulated by the States. It was the holding company problem that has now, I hope, been solved at least in part because the thrift regulatory system has been disbanded and moved into another operation. So I think that is what you would have to say, that it was not an insurance failure in any sense.
    • Mr. CLEAVER. Mr. Woodall?
    • Roy WOODALL. Speaking from a retro type position, too, I think it emphasizes what he said, the fact that what triggered it was activities going on at financial products in the United States.

NAIC – Market Conduct

  • (p12) – Daniel Schwarcz (Associate Professor, University of Minnesota Law School:
    • So, notably, you will see that my testimony was focused on different issues than many of the other witnesses, and that is because it is true that solvency regulation is in many ways the core of insurance regulation.
    • Now, I say this to contrast it with market conduct and other forms of consumer regulation…. 
  • (p13) – Terri Vaughan (NAIC-CEO / IA)
    • The first thing I want to say, I agree with Professor Schwarcz that the level of our collaboration in market regulation is behind the level of collaboration in solvency regulation and that is something we have been working on for a number of years, to try to increase the collaboration.  

2011 0914 – GOV (Senate) – Emerging Issues in Insurance Regulation, Jack Reed (D-RI)  —  [BonkNote] 

  • The NAIC Examination (A6) Subcommittee, in 1974, recommended the establishment of a “separate and distinct” program of surveillance to ensure fair treatment of policyholders.
    • Thus was “market conduct” born.
  • The term “market conduct” has, however, fallen upon bad times. 

1991-2A, NAIC Proceedings

  • Market conduct emerged as a key issue in 1994.
    • Perhaps the biggest consumer protection story in all of 1994 was the role the NAIC played in the settlement with Metropolitan Life-complete restitution for consumers and $20 million in fines.
      • The NAIC coordinated, the states acted, and consumers came out victorious.
    • In 1995, we will be taking a hard look at the status of market conduct efforts.
      • Does it make sense to coordinate market conduct exams?
      • Are there ways we can further standardize ways of dealing with market conduct problems among the states?
      • Those questions and others will be addressed as 1995 progresses.  (p3)

—  Commissioner Lee Douglass, Arkansas Insurance Department, 1994 NAIC Vice President

1994 – NAIC – Annual Report – 28p

  • 1980-1, NAIC Proceedings
    • Market Conduct, Examination and Reporting (B) Committee
      • Market Conduct and Trade Practices (B1) Subcommittee
      • Agents and Brokers (B2) Subcommittee, 
      • Competition (B3) Subcommittee
  • 1980-2, NAIC Proceedings
    • Market Conduct, Examination and Reporting (B) Committee
      • Market Conduct and Trade Practices (B1) Subcommittee
  • 1980-4, NAIC Proceedings
    • Market Conduct, Examination and Reporting (B) Committee
      • Market Conduct and Trade Practices (B1) Subcommittee
      • Agents and Brokers (B2) Subcommittee
      • Competition (B3) Subcommittee
  • 1988-2, NAIC Proceedings – Market Conduct Surveillance (EX3) Task Force
  • G. Criteria for Collaboration
    • The following questions are designed to assist states with the determination of whether an issue is appropriate for collaboration.
    • Regulators are encouraged to review these questions whenever there is an issue of concern raised that involves a regulated entity that does business in many states.
  • ^^If there is not a reference available from the NAIC Research Library or NAIC Market Regulation Department, your concern is not likely going to impact other states.

2011 1207 – NAIC/FIO Meeting on Market Conduct, (Documents shared with FIO to facilitate discussion are attached) – Federal Insurance Office – 83p

  • 1988-2, NAIC Proceedings – Market Conduct Surveillance (EX3) Task Force
    • (p182) – Upon further discussion, Nebraska and Virginia reported reluctance to share any information if it could not remain confidential.
    • It was observed, however, that most states regarded the information as publicly accessible either under their Freedom of Information Act or otherwise.
    • It was decided that the confidentiality issue would be addressed in greater depth at the subgroup’s next meeting.
    • However, it was recognized that even if individual states would not be able to share their data bases, the development of a uniform software program for utilization by the states would still be a very valuable tool.
  • Our Lexington report alluded to the controversial issue of nonguaranteed policy element illustrations.
  • Currently, the issue is being addressed by four different groups:
    1. this task force;
    2. the Life Insurance (A) Committee’s Cost Disclosure Task Force;
    3. the American Academy of Actuaries Task Force on Nonguaranteed Elements; and
    4. the American Council of Life Insurance’s Subcommittee on Cost Comparisons.
  • For this reason, subsection 14(b) should await the consensus of opinion on this issue at the December meeting.  (p137)

—  Report of the Market Conduct and Consumer Affairs (EX3) Advisory Committee- JUNE 22, 1987

  • ⇒  Rules Governing the Advertising of Life Insurance and
  • ⇒  Life Insurance Products Coupled with Annuities

1987-2, NAIC Proc.

  • 9. Staff Report on Review of Market Conduct Laws
    • John Mancini (NAIC/SSO) reviewed the background that led to the subcommittee being charged to “conduct a review of specific market conduct laws, including anti-rebating laws, that have been adopted by the states, identifying state variations from NAIC models most important provisions.”
    • Mr. Bownes also expressed concern over this charge being overly broad and said he agrees that there may be little value in issuing a report that will point out the deficiencies of state laws with regard to market conduct.
    • Mr. Adkins said that he had requested that the subcommittee conduct this expansive study in response to sales and marketing practice violations over the last several years and to consumer
      desires for expanded market conduct enforcement authority.
    • Mr. Adkins (CIR) added that in the center’s study, 12 provisions in the Unfair Trade Practices Act and 15 provisions in the Unfair Claims Settlement Practices Act were analyzed.

1996-1, NAIC Proc.

  • (p13) – Life insurance: The coverage structure and company finances are notably different from other types of insurance.
    • Proportionately, market conduct problems with life companies are more likely to arise on the sales side and less likely to arise on the claims side, than in other lines of insurance.
    • There is significantly less interaction between the company and the consumer over the course of a customer relationship than with other lines of insurance and when market conduct problems do occur, they are often less likely to surface promptly in the form of consumer complaints.
  • (p13) – F. Other Useful Information
    • While complaint records and financial statements may be the most comprehensive and concentrated sources of data on market activity, there are many additional sources that should be reviewed in order to obtain the rest of the story. 
    • (p16) – Miscellaneous
      • (p17) – In addition, a review of recent insurance-related lawsuits can provide insight into consumer perceptions of market abuses and this information is publicly available.
      • Needless to say, market regulators should keep their eyes and ears open outside the office as well.
        • Valuable information can arrive in structured formats such as regulatory meetings, continuing education programs, e-mail discussion groups and clipping digests and also in less structured environments ranging from stories about lawsuits to interesting names in the news and chance remarks by acquaintances.
        • The more you know, the better equipped you are to ask the next question.
    • In addition, a review of recent insurance-related lawsuits can provide insight into consumer perceptions of market abuses and this information is publicly available.
  • Analyze known problem markets to evaluate likely causes:
    • Identify indicators that would shed light on the sources of the problems and suggest promising approaches for corrective action.
    • Develop data sources and methodologies that serve as triggers for further market conduct

2005 – NAIC – Market Analysis Handbook, Supported by Market Analysis Working Group (MAWG) – 96p

AIG – Regulatory Forbearance

  • NYSID – Dinallo – Governor – 20/30B
  • Lawsuit – Dinallo – Securities Lending Needs
  • Forbearance could address increases in European bank capital requirements; makes lending unnecessary. (p11)

2008 0916 – FRB – Email from Julie Dolan Regarding AIG Documents Requested – 17p

  • 2008 0913 – FCIC – FRBNY Email Mahoney and Mosser re AIG Update – SB-AIG-35651 – 1p
    • AIG has put together a term sheet for NYSID, which they will be discussing this evening.
    • The term sheet would outline all pieces of liquidity plan, and plans for debt and equity injections, plans for asset sales as well as regulatory forebearance to move assets from subs to parent.
    • NYSID: Dinallo outlined the same plan that AIG gave us earlier — ie move muni’s from P&C subs to parent, and parent send equity in life insurance subs to the P&C subs in return.
    • There are a number of multi-state regulatory hurtles to this, but Dinallo thinks it is possible to do.
    • Dinallo described P&C companies in NY and PA as having very large capital cushions, and so he thinks that they can accommodate this.
    • He also noted negative consequences in insurance markets in general if AIG goes down (ie cost of insurance is likely be much higher if they file) and negative consequences in muni bond market if GICs default so regulatory forbearance can be justified politically.
    • They are very happy to speak with our experts (Elise and team) tomorrow with more details.
    • My impression is that while they are comfortable with the capital dilution at the P&C companies, they are less knowledgable and comfortable about the equity value of the life companies, so they have work to do on that front.