Congress` power to regulate insurance activities under the commercial clause extends only to the extent that Congress` power to regulate interstate commerce. In the Patient Protection and Affordable Care Act,123 Congress passed a requirement for all U.S. citizens to purchase health insurance, commonly referred to as an individual mandate.124 This requirement has been challenged by a number of states as an unconstitutional exercise of Congressional powers to regulate interstate commerce. 2102. It addresses the question of whether banks and insurers are required under section 171 of the Dodd-Frank Act to enforce the same capital requirements by the Federal Reserve. As passed, the Act expressly states that the same standards are not required under this section. In addition, the bill prevents the Federal Reserve from requiring an insurer to file financial statements in accordance with generally accepted accounting principles (GAAP) when the company currently files financial statements with government regulators using only statutory accounting principles (AMP). It also provides that this provision would not prevent the Federal Reserve from collecting company- or group-wide information. All standards created by the IAIS are non-binding and will only be fully effective when adopted by government agencies with the legal authority to regulate insurance. In the United States, this authority rests primarily with individual states. This would generally mean that if state legislators and regulators did not pass new laws or regulations, international standards would not directly affect most insurers in the United States. It is also possible for the Federal Reserve to implement some IAIS standards through its authority over IFIS and holding companies with depositary subsidiaries, even if states do not act.
U.S. insurers operating outside the U.S. could also be affected by IAIS standards imposed by regulators in other countries. Unlike banks and investment companies, insurance companies have been licensed and regulated exclusively by states over the past 150 years. Legal and legislative milestones in the state`s insurance regulatory system include the Supreme Court decisions of 1868 (Paul v. Virginia)5 and 1944 (U.S. v. South-Eastern Underwriters Association)6 and the federal statutes of 1945 (McCarran-Ferguson Act).7 The McCarran-Ferguson Act expressly preserved the power of states to regulate and tax insurance. and also granted the insurance industry a federal antitrust exemption for “insurance.” (The development of insurance regulation is described in more detail in Appendix A; a legal analysis of the constitutionality of federal insurance regulation can be found in Appendix B.) In today`s world, there is a lot of talk about deregulation and making things easier for businesses. It can be difficult to design appropriate and prudent regulation of insurance activities in order to ensure solvency, promote competitive markets and ensure sound consumer protection.