Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, suggested that historic legislation could be passed this year that would begin the process of creating a greater federal role in insurance regulation. But he also cautioned last week that “the 101st senator” is beginning to emerge and “that’s the clock.”
Dodd made his comments at a hearing before his committee on the status of insurance regulation.
At the same time, House floor action on the Insurance Information Act of 2008, or H.R. 5840, and the National Association of Registered Agents and Brokers Reform Act, also known as H.R. 5611, was delayed until September.
H.R. 5840 would create an Office of Insurance Information within the Treasury Department and H.R. 5611 creates a streamlined system for non-resident licensing of insurance agents.
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Action was delayed after Rep. Jackie Speier, D-Cal., voiced concerns about whether the legislation would inadvertently preempt Proposition 103, a 1988 ballot initiative that mandates a prior approval auto insurance rating system for California. On the property-casualty side it rolled back auto rates, and on the life side it repealed the state anti-rebating law.
Dodd said he would be “very interested” in moving forward “with something along the lines that would be narrower [than an optional federal charter].”
Specifically, that would include legislation creating an Office of Insurance Information within the Treasury Department and reforming regulation of the surplus lines industry.
However, since neither the surplus lines nor the OII bills have been acted on by the committee, a lobbyist cautioned that “they will only have a couple of weeks to put together such a deal.”
“Once that 101st senator shows up, things get very, very difficult to move forward on,” Dodd said. “But I appreciate the importance of a couple of these issues on which I think there is some consensus.”
He added that he would like to do a survey of the committee “and my sense is they may be willing to move on some of this that we have talked about this morning so I will have to get back to you all on that as I ask my staff to review with their colleagues the possibility of trying to get something done before we adjourn in September.”
At the hearing, Sen. Richard Shelby, R-Ala., ranking minority member and one of the most powerful members of Congress on insurance issues, and Sen. Bob Corker, R-Tenn., both said they were open to support for an optional federal charter, although Corker did voice some concerns.
Shelby voiced his growing interest in an OFC in his opening statement, saying that in the 2 years since the last hearing on insurance, “developments in our insurance markets, as well as regulatory reforms abroad, have strengthened the case that our insurance regulatory structure is out of date.”
His immediate concerns are developments in the “crumbling” bond insurance market. “Because the financial problems of the bond insurers have impacted not only federally regulated institutions, but also our overall economy, I believe that closer scrutiny of bond insurance regulation by this committee is warranted.”
He also cited insurance company investment in mortgage-back securities, noting that while no insurance company “has yet failed during the turmoil in our credit markets, recent economic history suggests it should never be considered outside the realm of possibilities.”