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.
“You can have uniform national standards,” he said, “but not wipe out the states.” Federal regulators, he added, are concerned about systemic risk and not consumer protection.
Frank and Greg Zerzan, acting assistant secretary of the Treasury for Financial Institutions, spoke at a conference on financial institution regulatory reform organized by Baker & Daniels-Sagamore, a law and consulting firm.
Regarding TRIA, Zerzan spoke from a prepared text. He declined to make a substantive response when Larry Mirel, Washington, D.C., insurance regulator, told him that TRIA was “not an unqualified success” because of affordability and availability concerns in urban areas, like Washington and New York.
Indeed, Zerzan also didnt make a substantive response when asked by an official of the American Council of Life Insurers “to please consider the group life industry” when evaluating whether TRIA should be extended, and what shape it would take.
All Zerzan would say is that Treasury has just sent out the last of the survey forms it is asking the industry to respond to as it prepares the report on TRIAs viability over the last 30 months that is mandated to be presented to Congress by June 30. He said the administration wants to complete the report “as soon as possible.”
The industry had been hopeful that Zerzan would give some inkling as to administration support for extension of TRIA and what shape an administration-sponsored bill would take. His office is responsible for drafting the report that industry officials believe will play a key role in their efforts to get TRIA extended, and to win a commitment for a long-term “public/private partnership” on terrorism coverage, as well as specific coverage for nuclear, chemical, biological and radiation attacks. Zerzan acknowledged that such coverage is not specifically mentioned in the current TRIA bill.
Reproduced from National Underwriter Edition, March 4, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.