A key House lawmaker last week, introduced legislation that would create an interim federal insurance office within the Treasury Department, signaling his intention to quicken the pace of federal scrutiny into the future of insurance oversight.
The legislator, Rep. Paul Kanjorski, D-Pa., chairman of the Capital Markets Subcommittee of the House Financial Services Committee, introduced a bill creating an Office of Insurance Information within Treasury a day after holding a hearing on “Examining Proposals to Reform Insurance Regulation.”
In his opening statement at the hearing, Kanjorski also said he is prepared to give opponents of federal insurance regulation, especially agents, what they want in the form of legislation streamlining agent and broker licensing in exchange for their support for his bill creating the new Treasury agency.
The agents are seeking legislation creating a National Association of Registered Agents and Brokers (NARAB) designed to streamline nonresident insurance agent and broker licensing. The legislation is H.R. 5611. Supporters include the Independent Insurance Agents and Brokers of America and the National Association of Insurance and Financial Advisors.
“As we proceed today, the members of the Capital Markets Subcommittee should remain open to considering all reform ideas,” Kanjorski said.
“The status quo on insurance regulation, however, no longer works,” he added. “We live in an increasingly global marketplace, and insurance policy must keep pace. We have lost many manufacturing jobs overseas. We must ensure that jobs in the insurance industry do not suffer a similar fate.
“We must move swiftly, but we also need to be smart about it,” Kanjorski said, adding, “we will need the help of experts from the states, and I urge those here today to work cooperatively with us.”
The idea for an interim insurance office within Treasury came from the financial services reform “blueprint” released by Treasury March 31. (See NU, April 7.)
The blueprint called for creating an interim insurance office within Treasury that would focus on gathering information about the insurance industry and coordinating with state regulators on “pressing” insurance regulatory issues.
Specifically, such “pressing” matters would include international regulatory issues, such as reinsurance collateral, according to the Treasury blueprint. The interim federal regulator would also “serve as an advisor to the Secretary of Treasury on major domestic and international policy issues,” the blueprint said.
In comments to National Underwriter during a break in the hearing, Eric Dinallo, New York insurance superintendent who testified on behalf of the National Association of Insurance Commissioners, said state regulators “should be proud of 100 years of exceptional work,” adding that insurance has seen “little of the blowups you see in other areas of financial services.”
Dinallo said the industry has done very well in the key areas of solvency and consumer protection, but acknowledged that it’s a “clunky” system and is in need of reform.
“To that end,” he said, “the NAIC is open to a partnership that involves the federal government” and would help move towards uniformity on issues such as producer licensing and product registration.
However, he expressed concern regarding the two bills, one creating NARAB that was introduced in the House last month and Kanjorski’s legislation creating an interim federal office.
On the legislation creating the second version of NARAB, he said the concern was the level of industry involvement in the overseeing of the board, and that states needed to be able to refuse licenses to agents if they have had prior issues in their past.
On the legislation introduced by Kanjorski creating an Office of Insurance Information, he said “there is a perfectly justifiable need for the federal government to understand insurance better,” but expressed concerns if the bill was seen as leading to an OFC.
During the same hearing, David Nason, assistant secretary of Treasury, endorsed in principle legislation H.R. 3200, and S. 40, companion legislation introduced in the Senate last year. Both bills create an optional federal charter for insurance regulated through an agency to be created within Treasury.
Nason said in response to Rep. Kanjorski’s comments that he’s “delighted” about it and that “we look forward to working with him on legislation.”
Rep. Melissa Bean, D-Ill., and Rep. Ed Royce, R-Cal., sponsors of H.R. 3200, issued a statement “commending” Rep. Kanjorski for his decision.
They called it “a vital step toward providing a modern regulatory alternative to the antiquated and patchwork system of state insurance regulation.”
In his opening statement, Nason said, “The establishment of a dual federal/state system with an OFC provides the best opportunity for the establishment of a modern and comprehensive system of insurance regulation.”
The hearing marked the first time competing views on the future of insurance regulation had been aired in one forum since the Treasury unveiled its blueprint.
In his testimony, Nason expanded on the administration’s position and talked about the current bills creating an OFC.
“These bills contain many of the core concepts surrounding the establishment of an OFC structure,” he said, noting that “we look forward to evaluating further the specific provisions of these bills.”
Speaking for supporters of an OFC within the industry, a representative of the American Council of Life Insurance and the American Insurance Association said consumers would be the “major beneficiaries of an OFC system of insurance regulation, enjoying strong, national consumer protection standards and a more competitive and efficient marketplace.”
Alastair Shore, chief underwriter of CUNA Mutual Group, said, “An OFC, as set forth in the National Insurance Act of 2007, represents our best opportunity to advance regulatory modernization in a manner that works for consumers, the industry and the economy.”
He noted that, “At its core, the NIA is a strong consumer protection bill, which focuses on a robust centralized system that emphasizes safety and soundness and consistent market conduct regulation.”
Shore also noted the Treasury blueprint, saying it “recognizes the need for OFC and the role that the insurance industry plays in the new world of integrated and interconnected financial markets.
“Treasury’s report also notes that the disjointed state insurance regulatory system imposes increased cost and efficiency burdens on insurers and consumers alike,” Shore added.