WASHINGTON, D.C. –The U.S. House of Representatives’ Financial Services Committee unanimously voted to approve a bill forming a federal insurance office, sending the legislation to the House floor for final consideration.
After previous days of debate on the bill, which establishes an insurance office within the Department of the Treasury designed to collect information about the industry, the final vote exhibited little contention. The committee’s ranking Republican, Rep. Spencer Bachus from Alabama, said, "I think the underlying bill is a major step forward and will attract bipartisan support." Earlier, he had been among those exhibiting rhetorical resistance of the potential new federal office.
Rep. Paul Kanjorski, chairman of the House subcommittee that oversees the insurance industry, had originally introduced the bill, which became a component in Obama administration’s much wider financial reform effort.
Some insurance organizations — including the National Association of Insurance Commissioners — have opposed the insurance office in recent months, suggesting this could be a first step toward an optional federal charter. A recently adopted resolution of the National Conference of Insurance Legislators said the group "believes that the creation of any such insurance office will inevitably lead to federal insurance chartering." And Committee Chairman Barney Frank, D-Mass., promised as much before the Dec. 2 committee vote, saying he’ll be pushing for that federal charter early next year.
But other insurance associations have put their support behind the office. Charles E. Symington Jr., senior vice president for government affairs at theIndependent Insurance Agents & Brokers of America, said his group is "encouraged by the recent improvements made to the FIO bill — important legislation that addresses two criticisms of state regulation: the need for greater insurance knowledge in Washington D.C. and the purported difficulty of state regulators to effectively represent the U.S. insurance market internationally. Most importantly, the bill accomplishes these goals without creating a federal insurance regulator."
A coalition of associations — the American Insurance Association, American Council of Life Insurers, Reinsurance Association of America and the Financial Services Roundtable — have penned a letter to Kanjorski, supporting the office.
"Major events this decade highlighted the inherent limitations of the current insurance regulatory system and the critical need for insurance expertise at the federal level," read the letter. But the coalition expressed reservations about scaling back the new office’s authority to pre-empt state insurance regulation when representing the United States in international agreements. "These changes will substantially weaken the ability of the office to represent the U.S. effectively in international forums, diminishing one of the principal reasons cited by Treasury for establishing the office."
After the vote, Leigh Ann Pusey, president and chief executive officer of the AIA, said, "The federal government desperately needs to have the ability to create and empower an office that will understand how the insurance industry works, how it handles risk, utilizes capital, and meets the needs of its customers. The current state-based insurance regulatory system is not well-suited to bridge information or regulatory gaps that may arise in today’s complex and global economy."
Consumer Watchdog took issue with the office’s limited authority to pre-empt some state authority over insurance. "This bill is part of the insurance industry’s ongoing push to deregulate insurance by limiting state regulators’ authority and is sure to weaken consumer protection," said Carmen Balber, Washington director for the group, in a statement.
In the Senate, Sen. Chris Dodd, chairman of the banking committee, introduced the "Restoring American Financial Stability Act," which would also create an Office of National Insurance within Treasury, similar to the proposals by the administration and in the House. The Dodd version would be primarily advisory, but its information-gathering and coordinating role would include the power to issue subpoenas (BestWire, Nov. 10, 2009). That legislation is still awaiting a committee markup.
Contact the author, Jesse A. Hamilton, Washington bureau manager, at: [email protected].