A De Facto Regulator? A Primer on the National Association of Insurance Commissioners and its Influence in Texas
The private nonprofit has in effect, become a regulator without real accountability.
Founded in 1871, the National Association of Insurance Commissioners (NAIC) describes itself as a “standard-setting organization” that “is governed by the chief insurance regulators from the 50 states, the District of Columbia, and five U.S. territories to coordinate regulation of multistate insurers.”
NAIC is a nonprofit Delaware corporation and is tax-exempt under Section 501(c)(3) of the Internal Revenue Code, although the IRS has exempted it from the usual obligation of filing an annual tax return. It has more than 500 employees in three office locations around the country. Its proposed 2027 budget projects almost $192 million in operating revenue and $204 million in operating expenses, with much of the shortfall covered by anticipated investment income. According to the Government Accountability Office (GAO), NAIC in 2024 was funded overwhelmingly (94 percent of revenue) by fees charged to insurers, such as those paid by insurers to file financial statements, and to entities that purchase NAIC data and/or use its data systems.
Importantly, while NAIC solicits input from stakeholders in crafting model laws, as a private entity its actions are not subject to due process requirements or judicial review, unlike a state agency’s regulations.
Texas has adopted NAIC model laws, and references to NAIC and its guidelines are scattered throughout the Texas Insurance Code (TIC). For example, TIC Section 421.001 mandates that insurers carry adequate reserves, with compliance determined by reference to “current” formulas recommended by NAIC. A state statute incorporating standards promulgated by private associations is not uncommon.
Read the full primer in the link above.
