State Supervision And Regulation
Primary responsibility for overseeing the insurance industry that has rested with individual states since 1945, after Congress passed the MCCARRAN-FERGUSON ACT (PUBLIC LAW 15). In addition to supervision and regulation, states receive taxes and fees paid by the industry that amount to several billion dollars a year. State insurance laws are administered by state insurance departments that are responsible for making certain that (1) rates are adequate, not unfairly discriminatory, and not unreasonably high, and (2) insurance companies in the state are financially sound and able to pay future claims. To this end, states set requirements for company reserves, require annual financial statements, and examine company books. Each state has an insurance commissioner or superintendent who is either elected or appointed by the governor, with responsibility for investigating company practices, approving rates and policy forms, and ordering liquidation of insolvent insurers. The NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS (NAIC) has drafted model legislation and worked for policy uniformity, but regulations vary widely from state to state.
Whether insurers should be regulated by the states or the federal government remains at issue, but so far insurers and the NAIC lobbying have been effective in resisting federal regulation. Nevertheless, the federal government has a profound effect on the insurance industry through its taxes and a variety of regulations.
Popular Insurance Terms
Provision that holds a re-insurer liable for its share of losses even if the ceding company becomes insolvent before paying these losses. For example, XYZ Insurance Co. writes a fire policy ...
Canadian retirement plan much like U.S. individual retirement account (IRA). Here, an employee can contribute on a tax deductible basis C $3500 each year as a member of an employer pension ...
Buying a home or investing in a commercial property in the United States implies complex legal clauses. Perhaps one of the most perplexing ones is the noncontribution mortgage clause. If ...
Forced entry into premises. Coverage is provided under various property insurance contracts such as homeowners and special multiperil insurance (SMP). ...
Protection to maintain the value of a business in case of death or disability of a partner. Upon the death or long-term disability of a partner, insurance can provide for the transfer of a ...
Type of derivative traded on the Chicago Board of Trade that takes the form of an option on a catastrophe futures contract using a call-option spread as the basis for the contract. The ...
Plan initiated by the pension benefit guaranty corporation (PBGC) upon the involuntary termination of a pension plan. With the concurrence of the United States District Court, the PBGC ...
Automatic protection for an insurer against losses that exceed a predetermined loss limit. This reinsurance may be subdivided into three primary types: excess of loss, catastrophe loss, and ...
Form that provides insurance coverage for the insured in the event the damage or destruction of non-owned property reduces or terminates the insured's earnings. For example, if the insured ...
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