What is the legal basis for insurance regulatory authority in the United States?

The legal basis for insurance regulatory authority in the United States stems primarily from state constitutions and statutes. Each state has the sovereign power to regulate insurance companies operating within its borders, a responsibility that has been historically upheld by the courts. This authority encompasses the establishment of laws concerning the formation, operation, and dissolution of insurance companies, as well as oversight of their financial solvency, rates, and the practices they employ.

While the 10th Amendment affirms states' rights to legislate on issues not explicitly outlined in the Constitution, and the McCarran-Ferguson Act acknowledges state regulation of the insurance industry, the direct source of authority for insurance regulation resides in the state-level legislative framework. Therefore, state constitutions and statutes provide the foundation for regulations governing the practice of insurance across the United States.

Federal acts, such as the McCarran-Ferguson Act or the Federal Insurance Act of 1945, serve to recognize state authority and establish certain frameworks for oversight, but they do not create the core legal basis from which such authority is derived. In summary, the comprehensive regulatory structure of insurance lies within state laws, explicitly defined by each state's legislative body, reflecting the decentralized nature of insurance regulation in the U.S.