OIR Discusses Confidentiality of Administrative Supervision
Insurance Commissioner Kevin McCarty has written a letter to The Heartland Institute responding to recent suggestions that the Office of Insurance Regulation should have made information about Northern Capital Insurance Company available to the public sooner than it did. Northern Capital was subject to administrative supervision by the Office of Insurance Regulation, but the company’s financial condition did not improve and transactions that would have alleviated its problems did not materialize. The company therefore was placed into rehabilitation.
A state legislator joined with other groups in recently stating that the Office of Insurance Regulation should have informed consumers sooner about Northern Capital’s troubled condition. In many instances, however, administrative supervision is a confidential process by which the Office of Insurance Regulation can monitor an insurer’s financial and operational affairs while it tries to implement recovery plans. The confidential nature of the administrative supervision is designed to prevent a “run on the bank” that would negate the insurer’s ability to execute its plan. This is not to say that an insurers’ recovery plans always will be successful— just that premature, adverse publicity surrounding the insurers might thwart the very plans that would allow their conditions to improve.
Commissioner McCarty points out in his letter that the Office of Insurance Regulation has a range of regulatory options in dealing with any troubled insurer. In most cases, these options are available only when certain standards are met. In the specific case of Northern Capital, Commissioner McCarty provides a timeline indicating that the Office of Insurance Regulation did not have grounds to order the company into rehabilitation at the outset of its troubles. Commissioner McCarty also describes how the administrative supervision process aided in the eventual rehabilitation effort.
More generally, Commissioner McCarty indicates that the regulatory options and triggers used by the Office of Insurance Regulation are defined by the legislature, and the OIR will use any other options or triggers that the legislature considers appropriate. He cautions, however, that making every supervision public would limit the ability of insurers to engage in transactions that might improve their conditions and might end up costing the Florida Insurance Guaranty Association (FIGA) and the public more because private market and regulatory solutions short of rehabilitation and liquidation will be less viable.