In an ambitious move to craft legislation that will override state case law on corporate governance, potentially challenge the federal securities laws as the primary source of the requirement to disclose corporate risk factors, and extend the extra-territorial reach of state insurance regulators to examine and control insurance holding companies and insurers beyond their state borders, a key committee of the National Association of Insurance Commissioners (“NAIC”) has exposed amendments (the “Amendments”) to the Insurance Holding Company System Model Act (#440) (the “Act”) and changes to the supporting regulations1 for a 30-day comment period ending July 21, 2010. The NAIC is seeking to focus the intellects and energies of directors on evolving risks facing insurers, such as those exemplified by the recent financial crisis and ensuing recessionary economy. To some, this process is seen as the effort, no doubt in good faith, of the executive branch (i.e., insurance regulators) to compel the legislative branch to change existing law (through the NAIC accreditation requirements), while paying insufficient attention to the precedents set by the judicial branch (e.g., case law regarding oversight duties of directors). In addition, issues of federalism are raised as the existing disclosure requirements of the federal securities laws do not dovetail with the disclosure requirements of the Amendments.

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