Just months after championing governance reforms thateffectively kicked him off the NAIC's Executive Committee, Louisiana InsuranceCommissioner James Donelon is back in the room and making noise.
The outspoken regulator this week aired conflict-of-interestconcerns over the insurance regulatory organization's search for a new CEO,launching a bid toban former regulators from NAIC jobs until two years after they leave office.The so-called "cooling off" period would ensure an ethical hiringprocess, he said, forcing the organization to broaden its search forcandidates.
Donelon first said in January that he to bar regulators from returningto the NAIC so soon after serving in government. But the official proposalfailed to garner any support among members of the NAIC's Governance Review TaskForce. Several regulators criticized the provision over the possibility that itwould limit the organization's applicant pool.
The NAIC is in the early stages of looking for a newexecutive, following the shortened tenure of former Sen. Ben Nelson. That process shouldinclude casting the broadest net possible, California Insurance CommissionerDave Jones said at the April 5 task force meeting, rather than disqualifyingpotentially highly qualified candidates ahead of time. He defended the NAIC'sability to fairly evaluate applicants, adding that the potential forconflict-of-interest accusations means the organization is likely to be harderon former regulators vying for the CEO job.
"Anybody who serves on any board is always confronted,in the private sector and the public sector, with having to put aside one'spersonal feelings or friendships for the good of a decision," Jones said."It's about, who's the right person to hire for an organization?"
Vermont Department of Financial Regulation CommissionerSusan Donegan, Wisconsin Insurance Commissioner Ted Nickel and New HampshireInsurance Commissioner Roger Sevigny were among those who also voicedopposition to a cooling off period, with Sevigny calling it a"travesty" to consider excluding possible applicants.
Donelon initially planned to revive the issue a final time at an April 6meeting of the entire NAIC membership, saying in an interview following thetask force meeting that he hoped it would prompt more discussion even if it didnot pass. But he did not follow through on that pledge. He said later that hechanged his mind after concluding there was not enough support among theExecutive Committee members to consider the proposal.
A return to theExecutive Committee
Donelon sprung the proposed two-year ban on his fellowcommissioners at the end of an earlier Executive Committee meeting on April 4,saying at the time that it would bring the NAIC in line with the rules oftenplaced on state and federal legislators and bolster the organization's image.The discussion was moved to the next day's Governance Review Task Forcemeeting, where Donelon warned that there were "clear signs" currentinsurance commissioners are angling for the CEO position while still in stateoffice.
"There is perception of this being a fraternal, not aserious public policymaking, organization," he said. "It is a publicpolicymaking organization and we owe that public the most confidence that wecan give them in our processes."
The proposed cooling off period is likely just one elementof a broader game plan for Donelon, who oversaw Nelson's hiring and remained anardent supporter even as others grew frustrated with the former senator'sperformance as CEO. Donelon has long signaled his desire for altering the waythe NAIC operates, backing a 2013 effort to reform its governance that resulted in theformation of the Governance Review Task Force. He then played a central rolepushing through the 2015 changes that shrank the size of the Executive Committeeby removing all of the past presidents — including himself.
Since Nelson's departure, Donelon has called for findinganother CEO with deep connections throughout Washington, D.C. None of thecurrent regulators have the national profile that he believes the NAIC needsits top executive to have, he said. Eager to be more involved in the searchprocess, Donelon found his way back onto the Executive Committee this past weekby taking over for North Carolina Insurance Commissioner Wayne Goodwin as vicechair of the NAIC's southeast zone. Goodwin, who is running for re-election,gave up his role to focus more on his campaign and nominated Donelon to takehis place.
That raised eyebrows around the NAIC among those whorecalled his argument that a smaller Executive Committee would be moreeffective and less beholden to commissioners who were not executive officersbut nonetheless able to participate in the meetings. Donelon said that he stillsupports the concept of a more focused Executive Committee, but felt he neededto be involved again as the CEO search dragged on. He will not have a directhand in vetting candidates, which is left to the NAIC's Internal AdministrationSubcommittee. But the Executive Committee does vote on whether or not toapprove the final CEO candidate.
The NAIC has made little formal progress toward selecting anew leader since Nelson's January departure. Regulators are still debating whatrole the next CEO should play within the organization, and have only justapproved the consideration and hiring of an executive search firm. Some shareDonelon's wish for a politically connected power broker who can exerciseinfluence on behalf of the state-based regulatory system.
"We need somebody that has some clout in D.C.,"Mississippi Insurance Commissioner Mike Chaney said in an interview, addingthat the NAIC needs to defend its turf from the federal agencies andinternational groups aiming to take greater control over insurance regulation.
Yet others have prioritized finding someone who will do thelower-key job of running the organization while state regulators take on policyissues, similar to the role that acting CEO Andrew Beal plays now. The NAIC hasalso discussed hiring a more organization-focused leader to manage day-to-dayoperations and then building up a separate lobbying operation charged withpushing its interests on Capitol Hill, multiple commissioners said.
But the lack of consensus has not stopped current regulatorsfrom weighing runs at the CEO job. Outgoing Florida Insurance CommissionerKevin McCarty plans to apply for the position once he officially resigns fromthe state Office of Insurance Regulation, sources said in recent months, andbelieves he has the credentials and support within the NAIC to win the job. Thedebate over a cooling off period and potential for conflicts of interest hasnot shaken that resolve, said one source familiar with his plans, who requestedanonymity because McCarty has not officially announced his candidacy.
McCarty said April 4 that he does not see any conflicts ofinterest in the NAIC's current hiring process.
Alabama Insurance Commissioner Jim Ridling also said that"two or three" commissioners have asked him whether they would bequalified enough to apply for the CEO role, though he emphasized that they didnot lobby for his support. He declined to name those individuals. Ridling opposesa cooling off period, citing concerns that it would limit the organization'sapplicant pool.
Informal maneuvering threatens to undermine the NAIC'scredibility with potential outside applicants and the broader insurance world,Donelon said, at a time when the organization needs its next CEO to play acrucial and effective role in defending the state-based regulatory systemagainst a range of challenges.
"If we continue to have it understood that we canchoose from within our own ranks to hire, for up to seven figures or more peryear, then that will certainly have a chilling effect on the number of qualitypeople who are willing to put themselves through the process of applying forthat position," he said. "It does have a very detrimental effect onour ability to get the best and brightest."