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November 26, 2008 at 07:30 AM
Congressional approval of federal regulation of insurance appears to be unlikely for 2009, and an optional federal charter may never be created, according to the head of the Federal Deposit Insurance Corp.
FDIC Chair Sheila Barr shared those views Nov. 14 with the directors of the American Insurance Association, Washington.
If insurance is addressed next year, the focus of the incoming Obama administration and federal banking regulators will be on the life insurance side of the business, not on the property-casualty side, Bair said during the off-the-record briefing, according to a summary of the briefing obtained by National Underwriter and confirmed through other sources.
Bair said plans to create a federal insurance regulatory agency may fall by the wayside in Congress as the administration seeks to consolidate regulatory agencies rather than to create new ones.
Insurers seeking federal regulation might be better off finding a regulatory home within existing federal banking agencies, Bair said.
“Re-regulation will favor fewer regulators at the federal level, rather than more, and it will be done in phases,” she said, according to the summary of her remarks. “All current federal regulators have their hands full with the various bailout and stimulus packages that Congress has passed.”
Creation of a separate federal agency to regulate insurance is unlikely, she added, because “the last thing federal regulators need is to be distracted by turf fights among the four current federal regulators.”
Those in the p-c industry who want federal oversight in general, and a federal charter in particular, face a difficult uphill climb because their sector “is not in any financial trouble, and it is state-regulated, so it is not in the sights of those who will be involved in federal financial services regulatory reform,” Bair said.
Bair told AIA the p-c industry “may have to fight to get in the process and the [regulatory reform] legislation, and differentiate itself from the banks, if that’s what the AIA companies want.”
However, “in the long term, there seems to be consensus that it would be beneficial to Congress and the Treasury/administration if there were insurance expertise at the federal level,” Bair said, according to the AIA summary.
Looking at the broader regulatory reform picture, Bair said dealing with an overhaul of financial services regulation will be delayed by the incoming Obama administration and Congress until 2010 in favor of tackling more urgent priorities. Moreover, it will be done in “phases,” she said.
She also told AIA members that the Obama administration will take the lead in drafting legislation overhauling regulation of financial services.
During the question-and-answer session that followed, an industry lobbyist said Sen. Chris Dodd, D-Conn., chair of the Senate Banking Committee, and Rep. Barney Frank, D-Mass., who heads the House Financial Services Committee, will serve to “balance things out.”
Asked to elaborate on her remarks to the AIA, Bair, responding through FDIC representative David Barr, said that “since this was not a public event, we will not comment on the discussion.”
