In the latest iteration of a plan that’s been steadily gaining support from both Democrats and Republicans on the Hill, legislation was introduced yesterday that would create a federal insurance regulator.
The National Insurance Consumer Protection Act, introduced by Rep. Melissa Bean, D-Ill., and Rep. Ed Royce, R-Calif., would allow all insurers the option of being regulated by a federal regulator or continue to be regulated by states, as has historically been the case.
“The events of 2008 show us that insurance reg reform can no longer be postponed. It is needed now,” Ms. Bean said in a statement.
The bill would provide consumer protection while eliminating barriers to industry competitiveness in global markets, she said.
“Beyond the inefficiencies created by the fragmented state-based system overseeing insurance, systemic gaps have revealed themselves in recent months,” Mr. Royce said in the statement.
“Until these gaps are filled, the threat of another
AIG remains,” he said, referring to American International Group Inc. of New York, which was taken over the federal government after the insurance giant ran into financial stress stemming from its sale of credit default swaps.
Under the bill, a parallel national system of regulation would be created at the federal level for insurers, insurance agencies and agents, similar to the dual banking system.
An Office of National Insurance would be created within the Treasury Department, similar to the Office of the Comptroller of the Currency, with a commissioner appointed by the president for five-year terms subject to Senate approval.
Both national and state insurers could convert their charters if approved by the national regulator.
Underwriting of both life and property-casualty insurance would be separated, but a holding company could own both national life and property-casualty insurers.
State and national insurance regulators would be required to share information with a systemic risk regulator, who could take action to mitigate actions by insurers that might have adverse effects on financial stability.
The National Association of Insurance Commissioners in Washington issued a statement opposing the bill. “This is not a reform bill; it is a deregulation bill, aimed at stripping the states of insurance oversight authority and denying consumers of the time-tested protections that regulatory power provides,” NAIC president and New Hampshire insurance commissioner Roger Sevigny said in the statement.
The insurance industry has been pushing for an optional federal regulator for several years, arguing that an optional federal charter is needed in order for the industry to operate competitively globally.
A federal regulator “is an appropriate and essential adjunct to broader reform efforts,” Frank Keating, chairman and chief executive of the American Council of Life Insurers in Washington, said in a statement.
“It will ensure that the resulting overall regulatory system will be seamless and will provide consumers with a safe and stable financial services marketplace,” he said.
