WHY FEDERAL INSURANCE REGULATION?Normally, insurance companies are regulated by the states. As a result there are hundreds of statutes and rules affecting companies that operate in multiple states. The National Association of Insurance ComNAIC, missioners (NAIC) issues guidance to standardize insurance laws, but states are not required to follow its recommendations. As might be expected this results in increased costs as companies design multiple products to comply with diverse and sometimes conflicting state regulations and formalities.For the most part the Federal Government has not interfered in state insurance laws, leaving the regulation of the industry to state regulators. Non interference has worked adequately during soft markets in which insurance is easy to find.IMPACT OF A “HARD MARKET”During “hard” markets in which insurance coverage is difficult to obtain, the federal government has stepped in to allow an insurance company to operate in many states as long as one state agrees to license...