Research Handbooks in Financial Law series
Edited by Julian Burling and Kevin Lazarus
Chapter 25: USA: A Regulatory Overview of the World’s Largest Insurance Market
John Mulhern, Parimah Hassouri and Daren Moreira 1. INTRODUCTION Perhaps the most important, and the most challenging, consideration in evaluating the US system for regulation of the insurance industry arises from the fact that, unlike most western nations, the US insurance industry is regulated primarily at the local level by the various states, and not at the national level by the US federal government. The legislature of each state, district or territory enacts laws that govern the insurance industry within its borders. Insurers and reinsurers are regulated by state government ofﬁcials in the state under whose laws they were incorporated (referred to as their ‘domiciliary state’), and to a degree by every other state in which they conduct business (referred to as ‘non-domiciliary states’). Consequently, on any given insurance regulatory issue there could be as many as 56 sovereign governments with potentially applicable laws, regulations and supervising regulatory agencies.1 It is true that the state insurance regulators working through their national association, the National Association of Insurance Commissioners (or ‘NAIC’) have made strides towards promoting uniformity of state insurance laws and regulations, and requirements are more uniform between the states than they once were. There are, however, still important differences between the laws of the various states in this area and a position on an insurance regulatory question in one state may not be followed in other states. This chapter provides an outline of this system of regulation. 2. BRIEF HISTORY OF US INSURANCE REGULATION The state-based system of...