Whatever one thinks about the need for improving the efficiency and increasing the uniformity of insurance regulation, the Interstate Insurance Compact recently submitted by the NAIC for approval by the States is an exceptionally dangerous way to go about it, as this unprecedented Compact endangers both our system of republican government and individual freedoms and liberties.

The Compact calls for the creation of a private corporation, the "Commission," which will be given sweeping and overlapping legislative, executive, and judicial powers over every State that joined. This delegation of broad and often exclusive governmental powers to a single private agency would violate the guarantees ensuring the separation of powers that are part of the constitution of every State. These guarantees ensure that no single branch of government is authorized to enact a law, promulgate rules and regulations to fulfill its purposes, monitor its compliance, and simultaneously prosecute, judge, and punish its offenders. But these are exactly the kinds of diverse and exclusive powers that the Compact bestows on the Commission, e.g., the power to "promulgate Rules . . . which shall have the force and effect of law," to "prosecute legal proceedings," to immunize itself from any "suit and liability," "[t]o resolve any disputes" between the States," and to "exempt" itself "from all taxation in and by the Compacting States."

The Commission would not only be omnipotent, it would be both secretive and largely immune from control by the governments that gave it birth. Indeed, the Commission's edicts -- "which . . . shall be binding in the Compacting States" -- would preempt any contrary state law. Furthermore, the fact that the individual Commission members delegated to exercise these powers are not required to be elected officials or even employees of the State that they ostensibly represent constitutes a separate violation of separation of powers principles. Finally, the powers that are slated to be created by the Compact and exercised by the Commission would violate state constitutional prohibitions on special legislation and state constitutional guarantees of unfettered access to the courts.

For these reasons, NCOIL should join the Attorneys General of 44 States in urging caution before any State joins the Compact.

View Mr. Miltenberg's complete analysis of the Compact (PDF)