The House Democratic leadership pulled from the floor late on Sept. 17 legislation that would create an Office of Insurance Information within Treasury.

Ironically, action was delayed just hours after the American Council of Life Insurers, Washington, sent a letter to Treasury Secretary Henry Paulson which said that in the wake of the government’s intervention in AIG, that the Bush administration should use its own authority to establish an Office of Insurance Information within Treasury.

The decision to pull the bill from the so-called “suspension calendar” was lambasted by Joel Wood, senior vice president of federal affairs at the Council of Insurance Agents and Brokers. The bill is H.R. 5840.

“In the aftermath of the federal government’s emergency $85 billion loan to AIG, it is disappointing and highly surprising that a misguided concern has been raised about this legislation by a freshman member,” Mr. Wood said.

“We are still confident that this bill will pass the House, but every concern about unjustifiable preemption of state law is specious,” Mr. Wood said.

“If anything, most people within the industry would argue that it doesn’t empower the federal government enough to fulfill its responsibilities to the national economy,” he said.

The decision was made by House Speaker Nancy Pelosi, D-Calif., after Jackie Speier, D, the newly-elected congressman from a neighboring district, continued to voice concern about the potential impact of the bill on Proposition 103, and other state initiatives that retain a tight control on insurance rates and rules.

At the same time, the House did pass under expedited rules, legislation that would recreate the National Association of Registered Agents and Brokers.

That bill, H.R. 5611, (the National Association of Registered Agents and Brokers Reform Act of 2008 or NARAB Reform Act,) is designed to reform nonresident agent licensing.

It is now likely to be referred to the Senate Banking Committee for further action.

But Congress does not plan to be in session beyond next Friday, Sept. 26, so it is unclear what will happen, to either piece of legislation, or to other important insurance legislation, including a bill to reauthorize and reform the National Flood Insurance Program.

Such legislation has passed both houses of Congress in different forms, but only behind-the-scenes talks are now underway to resolve the major conflicts between the 2 bills.

Ms. Pelosi acted after a letter was sent to by Consumer Watchdog, a California group which was behind the passage of Proposition 103, which governs rates and procedures on property insurance in California.

The letter said that in the wake of the government’s decision to loan $85 billion to AIG for liquidity purposes, “Congress needs to rethink a proposal that would give the Treasury Department the authority to negotiate international insurance agreements and then preempt unspecified state laws that conflict with those agreements.”

The group said that it has worked with Congressman Kanjorski, who has amended the proposal to bar preemption of California’s insurance reform law known as Proposition 103 and related laws in other states. But, Consumer Watchdog said, with the $85 billion bailout of AIG announced last night, “Congress should not be considering a bill that would allow any deregulation of insurance or overriding of state laws.”

In reaction to the decision to pull the bill, Mr. Wood added that, “Other sources are dumbfounded that a member who has joined the committee hardly 6 months ago has taken on her chairman [Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee] and used her clout with the speaker to put the brakes in the middle of the AIG crisis.”

He said this legislation is a ‘no-brainer’. “It is a minimal response from the federal government to the AIG disaster where the government is on the hook for tens of billions of dollars from a non-federally regulated insurance company,” he said.