A - Mayhall-Noonan

Question 1

Mayhall

why insurance regulation was born at the state govt level in US.

Answer 1

• In mid 1850’s, there was little resources at the federal govt level
• State govts were more developed to handle a new concern like insurance industry.

Question 2

Mayhall

why the US federal government attempted to take over insurance regulation.

why the federal take over did not work.

Answer 2

• Companies with multi-state business had difficulties with all the different rules between states.
• Those companies joined a movement for federal insurance regulation, but the movement was more about avoiding regulation that about promoting federal superiority

Question 3

Mayhall

Paul v Virginia (1869)
Discuss ruling and implication for industry in US

Answer 3

• TRUC: Inter-PAUL, commerce du viol - NOT!
• US Supreme Court said insurance was NOT INTERSTATE COMMERCE and that state regulation did NOT VIOLATE US CONSTITUTION.
• Hence, Insurance is subject to state regulation, not federal regulation
• State primacy emerged.
• To defend their authority, States created NAIC in 1871 to bring uniformity to insurance regulation.

Question 4

Mayhall

why the insurance industry avoided New Deal federal regulation that fell on the banking and securities state-based regulation.

Answer 4

Because the insurance industry survived the Great Depression largely intact.

Question 5

Mayhall

US v. South-Eastern Underwriters Association (1944).

What was the US Congress response?

Answer 5

Truc : SE-UWR (sewer) - FLUSH Paul-v-Virginia

• Anti-trust case brought under the Sherman act
• Supreme Court found that insurance was subject to federal regulation, overturning Paul v Virginia.
• Insurance was now Commerce under US Constitution, so it could be federally regulated.
• US Congress, in 1945, passed McCarran-Ferguson Act.

Question 6

Mayhall

McCarran-Ferguson Act (1945).

Answer 6

• says that state insurance regulation is in the public interest.
• that no federal law should invalidate state insurance regulation, unless specifically designed for insurance.
• However, federal continues to try to take upon the state regulation.

Question 7

Mayhall

3 federal laws about insurance provided in McCarran-Ferguson Act.

2 purposes of these federal laws

Answer 7

1) Sherman Act
2) Clayton Act
3) Federal Trade Commission Act
Purposes :
1) To prevent anti-competitive practices
2) to regulate trade
3) to promote consumer protection

Question 8

Mayhall

3 measures that NAIC took when Federal proposed federal charting of insurance regulation.

Answer 8

1) codification of Accounting Principles
2) Risk-based capital requirements.
3) Federal Regulation Accreditation Standards

Question 9

Mayhall

Discuss Gramm-Leach-Bliley Financial Modernization Act of 1999.

Answer 9

• LGBT (regroupe des gens de tous les horizons, compréhensif)
• Congress passed the Act in 1999.
• comprehensive framework for affiliations of banks, securities and insurance companies.
• Conclude that state should regulates insurance industry, but set out minimum standards that state regulations must meet unless federal law take over.

Question 10

Mayhall

2 recent Acts (after Gramm-Leach-Bliley) challenging the Primacy of State regulation by federal regulation

Answer 10

1) DODD-FRANK

2) PPACA (OBAMACARE) Patient Protection and Affordable Care Act.

Question 11

Mayhall

Describe PPACA

Answer 11

• PPACA (Patient Protection and Affordable Care Act) - OBAMACARE
• reform of health insurance market
• health benefit plans to be marketed through insurance exchange.
• federally-mandated but state-created
• Under PPACA, health insurers must maintain specific medical-loss ratios set by federal law.

Question 12

Mayhall

2 implications of DODD-FRANK Regulation in US.

Answer 12

1) Creates FEDERAL INSURANCE OFFICE (FIO) to collect info on insurance industry and to draft a proposed federal insurance regulatory system.
2) Creates FEDERAL STABILITY OVERSIGHT COUNCIL (FSOC) to monitor financial market and identify risk to financial stability in US

Question 13

Mayhall

Roles of Federal Stability Oversight Council (FSOC).

Answer 13

1) identify risk to financial stability in US
2) apply higher financial standards to companies
3) can declare that an insurance company pose a systematic risk and is subject to federal supervision