The current 50-state system for regulating the U.S. life reinsurance industry needs to be replaced.
David Gates, general counsel at Generali USA Life Reassurance Company, Kansas City, Mo., made that argument here Wednesday during a hearing of the capital markets subcommittee of the U.S. House Financial Services Committee.
The subcommittee convened the hearing to look at H.R. 5637, a bill that would create a uniform regulatory system for surplus lines insurance and reinsurance.
Most of the witnesses at the hearing represented the property-casualty insurance industry, but Gates spoke on behalf of the American Council of Life Insurers, Washington, as well as his own company.
State regulators are doing their best, but “increasingly they are laboring under a system that is incapable of responding adequately to the realities of global risk and capital management,” Gates said at the hearing.
“U.S. regulation of life reinsurance has become increasingly ad hoc and inconsistent,” Gates added. “It has not kept pace with the risk-based regulatory standards of competing financial sectors, such as banking. It has not recognized newer forms of reinsurance as prudent risk management tools for life insurers in their development of consumer-driven financial and retirement security products.”
The ACLI supports H.R. 5637, but it also continues to support broader proposals to let insurers choose between state regulation and federal regulation, Gates said.
“We urge Congress to pursue a comprehensive federal regulatory option for insurers and reinsurers,” Gates concluded.
One lawmaker at the hearing, Rep. Edward Royce, R-Calif., also expressed support for the optional federal charter concept.
There is “widespread agreement that our nation’s regulatory system impedes the ability of insurance consumers to get coverage at the lowest possible cost,” Royce said.