While the overall prospects for an optional federal charter remain unclear, it appears increasingly likely that such a charter will not be limited to life insurers, according to members of Congress speaking at an event here.
“A year ago, I would have said that property-casualty is not likely to be included [in an OFC],” said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee.
However, he said, p-c lines have become more central to the discussion because of lawmakers affected by the hurricanes of 2005 and disputes with insurers that took place over the handling of claims.
In his remarks, Frank also said that proposals to tax the inside buildup on life insurance policies should not inspire any great fears. Although such proposals are a “hardy perennial” and appear regularly in budget proposals, he said they have no chance of being approved and are typically there to provide political cover so the person proposing it can say he tried to reduce the budget.
The lawmakers who introduced OFC legislation in the last Congress also spoke about the issue, arguing that limiting the OFC proposal solely to life products could ultimately hurt the bill’s chances.
Frank made his comments at the Networks’ Financial Annual Insurance Reform Summit. Also speaking was Rep. Ed Royce, R-Cal., a member of the Financial Services panel and the sponsor of OFC legislation in the House last year.
Royce said that while a life-only charter might be easier politically because the “insurance agent lobby might be less inclined” to oppose such a proposal, making the legislation as broad as possible would ultimately help its chances.
As a counterexample, Royce pointed to the failed State Modernization and Regulatory Transparency Act. The SMART Act, he said, “is a very good example” of why narrowly defined bills fail to pass: It was unable to attract a broad enough base of support to gain any political momentum.
Sen. John Sununu, R-N.H., who originally introduced legislation in the Senate along with Sen. Tim Johnson, D-S.D., said that it is important for the bill to provide a “good legislative framework” for debate on the federal regulation issue, and that including p&c lines is an important part of providing that framework.