The Bush administration sent a chill through the insurance industry last week when its designated representative declined to show the administrations hand on the fate of the Terrorism Risk Insurance Actwhich expires Dec. 31despite advance notice that he might do so.
At the same seminar at which the administration official spoke, Rep. Barney Frank, D-Mass., ranking minority member of the House Financial Services Committee, appeared to throw cold water on congressional support for an optional federal charter. The support of Frank and other Democrats would be crucial as Congress considers how it might reshape state-based insurance regulation.
In response to a question, Frank said his perception of the shape of federal intervention in insurance regulation would be to “require states to defer to other states,” i.e., encouraging interstate compacts and reciprocity.
However, Frank implied he would support legislation facilitating such reciprocity only for the life industry. “Property/casualty regulation must remain local,” he stated emphatically.
Frank declined to support an optional federal charter when asked directly for his views by a representative of the American Bankers Association, who mentioned during his question that the ABA strongly supports such an option.
His reasoning was that majority Republicans, despite their federalism background, had taken actionssuch as passage of the class action reform legislation and giving federal banking regulators strong powersthat reduced the role of the states in regulation. Frank said Republican actions reveal that their attitude is that “states suck,” as shown in the current trend toward new powerful federal regulators, new federal legislation on class action reform and efforts to cap malpractice damage awards.