Additionally, Mirel says the recent international economic crisis pointed out the NAIC lacked the authority to regulate complex insurance companies with international operations, especially those with operations outside of insurance.

"The states are making a claim that they can be the regulator of all insurance companies, including those who operate on a worldwide basis, but I think less and less that is going to be the case," Mirel says. "A state insurance regulator has authority only within its own, and has no authority to regulate insurance companies that are doing business outside the state and outside the country."

He says the G-20, the group of large industrialized nations, is going to the U.S. government as representatives of the U.S., not the NAIC, as it tries to set standards to prevent future economic crises.

"That is because there is a gap in regulation [of insurance companies]," Mirel adds. "The gap is what happens when financial institutions operate around the world, and operate in more than one market, in more than an one industry."

Mirel asks, "Who can look at the overall activities of these giant institutions and make sure they are meeting the standards that will deal with potential economic problems? Insurance institutions operating worldwide handle billions of dollars every day. It is not going to be the South Dakota insurance regulator, or the New York insurance regulators to whom international regulators contact when there is a crisis. That is the problem the NAIC faces."

Mirel says "something has to give." The U.S. can regulate banks but it doesn't regulate insurance companies. If the NAIC is not a regulatory authority and each state's insurance regulator only has authority in that state, who will deal with international standards? 

"It has to be the federal government with or without the NAIC," Mirel answers. "The NAIC can play an constructive role, but it has to be the U.S government that deals with these large cross-border insurance companies."

States can deal with this by establishing the domiciliary state as the U.S. domestic regulator, and coordinate with the federal government on international issues, Mirel suggests.

Mirel acknowledges the state insurance regulatory system is expensive. "Elections are also expensive but we pay for it because we like democracy, we like a decentralized system," he says. "Americans prefer a decentralized system, because they are helpful and healthy."