As evidenced by movement on several fronts, momentum seems to be growing for both life and property casualty insurers to have an option to operate under a federal charter within the next 2 years.
These actions include the decision of Rep. Paul Kanjorski, D-Pa., chairman of the Capital Markets Subcommittee of the House Financial Services Committee, to hold a hearing June 10 on legislation creating an insurance information office within the Treasury Department.
Creating such an office as an interim step toward a federal charter was recommended in the blueprint for financial services modernization unveiled by the Treasury Department March 31.
The board of the American Council of Life Insurers plans to decide whether it will support the legislation, H.R. 5840, at a June 13 meeting.
At the same time, Rep. Barney Frank, D-Mass., chairman of the House Financial Services, said at a meeting of life industry officials in Washington on June 2 that enactment of legislation in the next Congress creating an optional federal charter is his “top priority.”
Steven Brostoff, an ACLI spokesman, said the trade group “is greatly encouraged” by Kanjorski’s legislation, and “supports the concept that a federal office is vital to represent the U.S. internationally on insurance issues and coordinate with state insurance regulators on national concerns.
“We continue to monitor the legislation and look forward to commenting further as it evolves,” Brostoff added.
He said the ACLI expects “to see a new OFC bill next year and we look forward to working with Committee Chairman Frank and Subcommittee Chairman Kanjorski to develop a strong proposal that can advance in the new 111th Congress.”
Also reflecting the growing momentum, Catherine Weatherford, executive vice president and CEO of the National Association of Insurance Commissioners, sent a memo May 28 to insurance commissioners and the Kansas City, Mo., staff of the NAIC saying she is considering moving her office to Washington.
She said she is considering the move because “having a stronger presence in Washington, D.C., will enhance the NAIC’s availability and access to consumer organizations, the U.S. Congress and industry trade associations.”
She said the proposed change “would otherwise have little impact on our operations in Kansas City,” but that “the NAIC membership, as part of its strategic management process, has a strong vision for designing options and implementing solutions for stronger, more uniform regulatory models in the future.”
According to several ACLI lobbyists who attended the meeting, Frank said he intends “to move very quickly with OFC legislation in the next Congress.” He specifically said it would cover both life and p-c insurance.
According to attendees, Frank said it would be a “very broad proposal,” on which action would be “front and center in 2009.”
Frank also said “the first bill will be the best bill,” and “you can read that as whatever you want in the bill, it should be in the first bill introduced,” one attendee said.
A staff official from Frank’s office confirmed that he met with ACLI lobbyists, but would not comment further.
Besides convening the hearing, Kanjorski also released proposed modifications to his legislation.
The revised language seeks to put to rest concerns voiced by officials of the NAIC and supporters of continued state regulation that the bill as introduced would give the Treasury broad authority to preempt state regulation of insurance.
The proposed revision to the legislation would give the Treasury Secretary the authority to stay a preemption of state regulation if an inconsistency is created with state regulation in an official international agreement entered into by the United States that would create preemptive rights, according to an analysis of the proposed changes by a lawyer familiar with the situation.
However, a last-minute glitch has developed because compromise language clarifying the preemptive authority of the OII also adds two provisions that are giving insurance trade groups pause.
One provision specifies that the OII would obtain its data on balance sheet and market conduct activities of the insurance industry from the NAIC. This provision was added at the request of the NAIC.
The other provision adds a representative of the Federal Trade Commission as a mandatory member of a board that would advise the Treasury Secretary on insurance-related issues.
The industry’s concern with the two provisions deals with conflicts the insurance industry has had with the FTC over credit scoring and market conduct issues. It is also battling with the NAIC over its authority to release market conduct information to the public.
A May 27 letter to the NAIC on the issue was signed by America’s Health Insurance Plans, the ACLI, the American Insurance Association, the Blue Cross Blue Shield Association, the National Association of Mutual Insurance Companies, and the PCI. It voices concern over privacy issues related to public release of market conduct data.
The FTC was barred through a provision in 1980 from investigating insurance companies unless it is authorized to do so by Congress.