A new analysis from the Digital Progress Institute finds that the NAIC’s credit rating framework is unaccountable, potentially captured, and bad for American consumers.
Last week, Joel Lauren Thayer, President of the Digital Progress Institute, published an antitrust case study on the National Association of Insurance Commissioners (NAIC) Due Diligence Framework, titled “The NAIC’s Credit Rating Power Grab.”
Thayer’s framing is direct: The NAIC is not a regulator, but rather a private, tax-exempt trade association that is now reaching for authority over credit rating methodology that Congress expressly refused to give the SEC:
“The NAIC, a private trade association with none of the SEC’s accountability, is proposing to claim more power over rating methodology than Congress gave the SEC itself.”
He goes on to highlight the NAIC’s lack of meaningful accountability:
“A private nonprofit would decide, without a hearing, without a reviewable record, and without anyone’s ability to appeal, which independent rating agencies count, and which asset classes get punished with higher capital charges.”
Thayer also takes up the conflict of interest problem (that Pinpoint previously flagged) – Iowa insurance officials simultaneously writing national valuation rules and advising the insurers they would govern – arguing that it exposes the NAIC to antitrust liability:
“This report argues that the Framework and the process that produced it are a live antitrust problem. Measured against the Supreme Court’s state-action doctrine, its standard-setting-capture precedents, and the actual text of the McCarran-Ferguson Act, the NAIC’s credit-rating scheme serves as a private cartel arrangement that happens to wear a faux regulator’s badge.”
Read the full analysis here.
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