Optional Federal Charter Prospects Brightening For Life Insurers

In comments during a panel discussion at the ACLI meeting, Jim Poolman, North Dakota insurance commissioner, voiced concern that such legislation is gaining support in Congress. Poolman said the NAIC had established a group to look into the issue. The bill was introduced by Wasserman Schultz in late July and is now under consideration in the House Financial Services Committee. It would establish federal enforcement standards if an insurer denied coverage based on disclosure by an applicant for insurance of future foreign travel plans. The ACLI also has submitted a policy statement to the NAIC as to how it believes the NAIC should respond.

In his comments, Keating said it is likely that legislation calling for an OFC for life will be introduced in the Senate “by the end of the year.” Sens. John Sununu, R-N.H., and Tim Johnson, D-S.D., “have expressed interest” in introducing a bill calling for an optional federal charter for both life and property-casualty, Dorgan explained later. In the House, Reps. Ed Royce, R-Calif., and Paul Kanjorski, D-Pa., both members of the House Financial Services Committee, plan to introduce a bill calling for an optional federal charter for life insurers, most likely as an amendment to the State Modernization and Regulatory Transparency Act.

However, sources say that since SMART is unlikely to be introduced and acted upon until next year, the Royce/Kanjorski bill is likely to be introduced as a stand-alone bill later this year.

In his comments, Keating said that SMART, “which does nothing for us, is on the rocks….” SMART is legislation being drafted by the majority staff of the House Financial Services Committee that would establish standards for state regulators to attain in establishing rules and laws for the insurance industry.

Dorgan explained later that Keating said the bill “does nothing for us” because the Republican leadership of the House panel appears to be moving toward focusing on property-casualty issues in SMART, whose introduction has been delayed continually since a draft was leaked in July 2004. “It is clear to us that the life section is not something that Rep. Mike Oxley, R-Ohio, chairman of the committee, is focused on at this time,” Dorgan explained.

However, she said, uniform producer licensing standards, of great interest to ACLI members, continues to be a major focus of the drafters of SMART.

In general, however, Dorgan said, congressional interest in an OFC for life stems from the fact that “there is a growing realization that the marketplace has changed dramatically since the McCarran-Ferguson Act was passed in 1945.”

American Council of Life Insurers President Frank Keating told attendees at his group’s annual conference that regarding an optional federal charter the issue is “not whether there will be an OFC for life, but when….”