The McCarran Act gives primary insurance regulation to the states. Some in the industry believe companies should have the option of being regulated by the states or the federal government. Others believe that the state system of regulation is most appropriate. All agree that the current state regulatory system needs modernization._______________
(1) Some of the content in this paper is derived or adapted from comments by Lawrence H. Mirel of Wiley Rein LLP and former insurance commissioner for the District of Columbia, February 9, 2007.
(2) The McCarran Ferguson Act Anticompetitive or Procompetitive? Patricia M. Danzon, the Wharton School of the University of Pennsylvania, Regulation - The Cato Review of Business and Government, 1991.
(3) Advisen QuickNote: Insurers? Antitrust Exemption Under Attack (Again), March 5, 2007.
(4) Based on A.M. Best 2008 Financial Size Category Information, 2008 Best's Ratings & Reports.
- The McCarran Ferguson Act was passed by Congress in 1945. Subject to certain conditions, the McCarran Act essentially returned insurance regulation to the states. The Act was designed to ensure the preeminence of state regulation not to free insurers from federal antitrust laws.
- The act included a narrow exemption from federal antitrust laws for activities that are regulated by the states:- Under the act, "No Act of Congress shall be construed to invalidate, impair or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or a tax upon such business."- Federal antitrust laws would apply "to the extent that such business is not regulated by State law."
- The McCarran Act, as mentioned previously, establishes three requirements for the antitrust exemption to apply:
- The activity in question must fall within the business of insurance
- The activity must be regulated by state law
- The activity must not involve boycott, coercion or intimidation