Regulators and representatives of the insurance industry appeared before Congress today to discuss a new draft of the Federal Insurance Office Act of 2009.
Regulators and representatives of the insurance industry appeared before Congress today to discuss a new draft of the Federal Insurance Office Act of 2009.
The House Financial Services Committee discussed three components of financial regulatory reform: strengthening investor protection, enhancing oversight of private pools of capital and creating a national insurance office.
The revised version of HR 2609, the bill drafted by Paul E. Kanjorski, D-Pa., chairman of the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, calls for the establishment of the Federal Insurance Office inside the Department of the Treasury. In previous versions of the bill, it was called the National Office of Insurance Information.
That office would not only monitor all aspects of the insurance industry but also recommend that the Federal Reserve System designate carriers and their affiliates as Tier-1 financial holding companies.
Though representatives from the American Council of Life Insurers and the National Association of Insurance Commissioners supported the establishment of the insurance office, they wanted to limit the extent of the office's power.
Dennis S. Herchel, assistant vice president and counsel of Massachusetts Mutual Life Insurance Co., speaking on behalf of the ACLI, said that while the industry wanted the federal insurance office to work with financial industry regulators, he warned against adding more regulators to the current battery of more than 50 state insurance commissioners.
“We think it's important to clarify that the [Federal Insurance Office] is not to have any general supervisory or regulatory authority over insurance companies,” Mr. Herchel said in his testimony. “The industry does not support adding an additional regulator on top of the 50-plus we already have.”
The group also suggested that some of the funding directed toward the insurance office be used to obtain industry experts, and that Congress may want to create an insurance industry advisory committee that can work with the insurance office on relevant issues.
The NAIC, a group of state insurance regulators, said that though it acknowledged there were areas that need regulatory reform, it opposed any initiatives that would undermine its authority. The current draft that Mr. Kanjorski has released goes beyond previous bills for the Federal Insurance Office and has reduced the role of state regulators, noted Therese M. Vaughan, chief executive officer of the NAIC.
In her testimony, Ms. Vaughan also said that the state regulatory group had considerable access to insurers' financial data and information through its producer license database. She was concerned about the role the NAIC would play in providing that information to federal regulators and whether state regulators would have access to data collected by the national insurance office.
“While nothing in the proposal precludes the national insurance office from being able to collect information from the NAIC,” Ms. Vaughan said in her testimony, “information-sharing between state and federal counterparts too often has been a one-way street, where information may be taken from the states through the NAIC without reciprocation.”
“Our support for any national insurance office is predicated on the notion that the office be a tool to connect the state regulatory system with the federal regulatory system, and not be an instrument to displace or diminish state insurance regulation,” she said.
