Insurance and banking industry officials met with Treasury Department officials on Feb. 1 in what was described by some attendees as a “courteous” meeting to discuss administration support for an optional federal charter for insurers.
The meeting was requested by Treasury as the agency considers what approach to take to legislation expected to be introduced this month by Sen. John Sununu, R-N.H., and Sen. Tim Johnson, D-S.D.
Under the bill, a federal insurance office would be established within the Treasury Department. It would be vested “with the authority to charter national companies and agencies and to implement the statute governing their activities.”
According to an outline of the bill obtained by National Underwriter, this office and the single appointed regulator responsible for its activities would regulate solvency, market conduct and accounting for federally chartered entities.
The meeting and introduction of the legislation are the opening shots in what is expected to be an intense lobbying campaign by supporters and opponents of the OFC.
The meeting with Emil Henry, assistant secretary for Financial Institutions at Treasury, was requested by the Treasury to air the arguments of OFC supporters in the insurance industry, according to Kevin McKechnie, a lobbyist for the American Bankers Insurance Association.
McKechnie declined to comment on the substance of the meeting.
The American Council of Life Insurers, a number of whose members attended the meeting and which is lobbying strongly for Congress to hold hearings soon on the Sununu/Johnson bill, also declined comment.
All ACLI spokesman Jack Dolan would say is, “We’re looking forward to the Senate Banking Committee’s review of optional federal charter legislation this year.”
Treasury officials declined to confirm or deny the meeting. “We’re not going to get in the business of confirming, denying or commenting on individual, private meetings,” a spokesman said.
The official also said that the agency, and as a result the Bush administration, “has not taken a position on the issue.”
But Lisa McGreevy, executive vice president for external affairs of the Financial Services Roundtable and president of its Government Affairs Council, said the meeting was “significant.”
The FSR represents large financial services companies, including insurers. It has established creation of an optional federal charter for both p-c and life insurers as a top priority for this year, said Steve Bartlett, FSR president, at a Feb. 2 meeting.
The meeting was significant, McGreevy said, “because for the first time Treasury has asked for and initiated a discussion about the OFC.”
“There is a dearth of information, a vacuum, in Washington, D.C., relative to insurance regulation,” she said. “Treasury, by default, has taken the lead on insurance issues as a result of what happened on 9/11.”
McGreevy said that as Treasury officials get involved in the insurance marketplace, it is natural for them to gather information so they can better understand the various policy options everyone is talking about.”
Another reason the meeting was important, McGreevy said, is that members of Congress are discussing the issue at length, i.e., legislation establishing federal standards for state insurance regulation that is being drafted by the staff of the House Financial Services Committee. She also cited the comments of Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee, establishing state insurance regulation as one of the issues the panel will take up this year. “As Sen. Shelby said last Tuesday, he is looking at it,” McGreevy said, “and it will be natural for members of Congress dealing with the issue to ask Treasury officials about their views.”
Staff officials for both Sununu and Johnson did not return phone calls seeking comment on their bill, but Dennis Kelly, a spokesman for the American Insurance Association, said that “indications are that the bill will be introduced later in February.”
Supporters of the legislation include the American Bankers Association, of which the American Bankers Insurance Association is a part, the ACLI, the Financial Services Roundtable, the American Insurance Association and the Council of Insurance Agents and Brokers, McKechnie said.
He said Treasury officials requested the meeting “because there has been a lot of talk about the issue” and they want to know what the proposal “looks like,” from the perspective of “industry stakeholders supporting such legislation.”
Hearings and introduction of a bill that would establish federal minimum standards for state regulators is expected within the next several months by the House Financial Services Committee.
It is unclear if and when the Senate Banking Committee will hold hearings and act on an OFC bill, but industry lobbyists say a number of CEOs of ACLI members have been asking Senate Banking Committee members for a prompt hearing on the OFC issue.
McKechnie said the bill has the support of the “overwhelming majority of life companies and most of the large p-c companies,” that is, p-c companies representing more than half of p-c premiums.
Smaller insurers, mostly those which operate within one state, constitute the “fault line” of those maintaining that state regulation should be sustained, he said.