Most Americans aren’t aware that an organization called the International Association of Insurance Supervisors is directing the course of U.S. insurance regulation. This international nongovernmental organization uses the National Association of Insurance Commissioners (NAIC), a U.S.-based nonprofit organization, to require American insurers to embrace diversity, equity and inclusion policies.
For an international NGO to attempt an end-run around the U.S. state-based regulatory model is an affront to state sovereignty. This justifies the need for U.S. regulators and state insurance departments to withdraw from the IAIS immediately.
As soon as President Trump took office, the Federal Reserve, Federal Deposit Insurance Corp. and Federal Insurance Office withdrew from the Network for Greening the Financial System. Withdrawing from the IAIS would reflect a similar realignment with Trump’s agenda to disentangle U.S. interests from agendas promoting DEI policies.
The IAIS is influencing state insurance regulation through the NAIC. According to a report by the free-market public policy Buckeye Institute, the NAIC “is a founding member” of the IAIS, “which has pushed (environmental, social and governance) and DEI agendas.”
The Buckeye Institute points out that “relationships between IAIS, NAIC and state regulators” do not raise “the same public scrutiny that federal actions receive.” The lack of transparency regarding how international NGOs are dictating state-level insurance regulations needs more sunlight. It should be closely scrutinized by lawmakers.
The Buckeye study is part of a growing literature that has highlighted this lack of transparency and the need for reforming the role NGOs play in policymaking. Additionally, a coalition of free-market organizations has pointed out that the NAIC is inexplicably deferential to the IAIS when drafting insurance capital standards. Opacity among NGOs risks putting the American insurance market at a competitive disadvantage compared to foreign counterparts. The NAIC is putting American insurance last when it should be putting American insurance first.
State legislatures have begun introducing legislation to address the problem of unaccountable NGOs. A state senator in Tennessee introduced a bill to prohibit adopting policies drafted by international NGOs, such as the IAIS. More states may follow and even go further with their reforms.
In addition to this type of reform, the Buckeye Institute’s report proposed additional recommendations. As part of this reform effort, policymakers should require NGOs submit annual reports to legislative committees showing state insurance department travel expenses to NGO conferences, descriptions of model proposals, and a “list and description of votes taken by regulators on any model regulatory proposals” at NGO committee meetings.
There is ample opportunity for lawmakers to make their mark and shed light on the DEI activism emanating from the IAIS and trickling down to state insurance departments.
Without legislative reform, the NAIC’s excessive and narrow-minded focus on private securities will continue to harm the NAIC’s budget. The organization is loading up on staff “including five technical employees for the Capital Markets and Investment Analysis Office.” This office has arbitrarily impugned privately rated securities without any justification. Wantonly punishing these securities also risks increasing the cost of credit typically allocated to U.S. middle market firms that employ 48 million Americans.
Lawmakers and the administration have an opportunity to crack down on DEI activism in the insurance sector. The best first step to stop the DEI infection is for governors to compel state insurance departments, and the administration to force U.S. regulators to withdraw from the IAIS. A combination of executive action and legislative reforms on transparency will pay dividends by ensuring that policyholders continue to have access to affordable insurance plans, and insurance regulators start applying America First principles to capital formation.
