By Sean O’Donnell

Commissioner Thomas E. Hampton of the District of Columbia Department of Insurance, Securities and Banking (DISB) said that recent activities and decisions by a National Association of Insurance Commissioners (NAIC)’s task force, the Reinsurance Task Force, will have significant impact on the regulation of reinsurers. Hampton said the task force, on which DISB participates, has considered a number of options about the future regulation of reinsurers, and a favored approach discussed by the task force is one that includes a rating mechanism for reinsurers.

Hampton made these comments as a featured speaker at the Society of Financial Examiners (SOFE), Maryland Chapter’s 8th Annual Career Development Seminar (CDS) in Baltimore, MD, on Sept. 20. The CDS was a three-day educational seminar that included about 140 regulators and industry participants from a number of jurisdictions including the District of Columbia, Pennsylvania, Maryland, Virginia and West Virginia.

The commissioner participated on the opening day of the seminar with Maryland Insurance Commissioner R. Steven Orr in a commissioners’ roundtable session. After brief openings by each, questions were fielded from some of the seminar participants on topics related to insurance regulation.

The questions covered a variety of topics and issues, including an overview of the domestic industries and accomplishments of the respective agencies, international accounting, the reinsurance rating mechanism, Sarbanes/Oxley, business ethics, best and worst moments as commissioner, and the advantages Hampton has as a longtime regulator versus the advantages that Orr has as a long-time member of the industry.

Hampton outlined the District’s insurance industry – 20 to 22 domestic insurers and Health Maintenance Organizations, and 64 captives and risk retention groups. He also outlined some of his proudest accomplishments, including current health care initiatives and NAIC’s accreditation of DISB. His best moments as commissioner included the overall quality of the staff at the agency, accomplishments of the captive and banking bureaus, and recent success in obtaining funding for consumer protection initiatives. Hampton added that his major advantage as a long-time regulator is that it makes him very knowledgeable about the history of many issues coming before NAIC.

Hampton’s closing remarks touched on a few issues not discussed previously during the roundtable. These included the regulatory scheme being used by the United Kingdom, Switzerland and Germany, whose only regulatory commonality with US insurance regulators is the licensing of companies. No financial examinations, no handling of consumer complaints, no review and approval of forms and rates exist in these countries. All three regulatory schemes focused on the enterprise risk management process developed by the insurance companies and the internal risk models the companies used to monitor and analyze risk exposures.

“This approach is hard to understand for U.S. regulators,” Hampton said. He also touched on the convergence of Generally Accepted Accounting Principles with International Accounting Standards that is currently underway, and the potential impact on statutory accounting. The NAIC will continue to monitor the progress of this convergence issue. Finally, Hampton commented on current issues regarding the secondary market for life insurance products.