Lawmakers already have drafted a letter calling for the incoming Treasury secretary to use existing authority to create an Office of Insurance Information.
A version obtained by National Underwriter is dated Jan. 14 and signed by Reps. Melissa Bean, D-Ill., and Ed Royce, R-Calif.
Bean and Royce were the primary sponsors of a bill introduced in the last Congress that would given insurers the option of choosing between a traditional state charter and a federal charter.
The drafters of the letter write that they want to encourage the new Treasury secretary to either “create an office within Treasury or assign a high level Treasury appointee to an insurance portfolio to fill a void on insurance oversight and expertise at the federal level.”
“The apparent risk of a systemic shock to the broader economy was the reason behind the government’s intervention to prevent the collapse of [American International Group Inc., New York],” the drafters of the letter write.
“We all share the belief that we must take steps to ensure that a similar situation does not occur in the future and we believe that an important first step ought to be the establishment of an office within Treasury which would have a knowledge-base and understanding of insurance operations,” the drafters write.
Creating an OII at Treasury also could help prevent a repeat of the kinds of problems that hit the monoline mortgage insurers and “resulted in a tightened credit market for insurers and significant losses by banks and other financial institutions,” the drafters of the letter write.
Supporters of a federal role in insurance regulation now appear to be calling for the creation of an OII and, separately, working to include an optional federal charter provision in broad regulatory restructuring efforts, according to sources close to the drafters of the letter and to industry lobbyists.
The Financial Services Roundtable, Washington, believes sending the OII draft letter would be a “key first step” in getting the ball rolling toward a stronger federal presence in insurance regulation.
But a federal charter for insurance must follow, according to Scott Talbott, an FSR senior vice president.
The American Council of Life Insurers, Washington, also is emphasizing the need to do more than create an OII.
“We support the establishment of an OII,” says ACLI spokesman Jack Dolan. “With globalization and deeper federal involvement in financial services, among other things, the need for federal involvement in insurance regulation is clear.”
But “our ultimate goal is an optional federal charter for insurers,” Dolan says.
In 2008, Rep. Paul Kanjorski, D-Pa., chairman of the House Financial Services Committee’s capital markets subcommittee, introduced a bill containing an OII provision.
FSR lawyers believe that the Treasury Department has independent authority to set up an OII, Talbott says.
But an OII created by the Treasury Department would have to be limited in size and could not pre-empt state regulation, Talbott says.
The OII created by the Kanjorski bill could have pre-empted state insurance laws that conflicted with U.S. negotiations with foreign governments.
The Kanjorski bill stalled on the House floor in September 2008.
In related news, Obama administration Treasury Secretary-designate Timothy Geithner appeared today at a confirmation hearing before the Senate Finance Committee.
Critics have raised questions about Geithner’s delay in paying self-employment taxes in connection with income earned while he worked for the International Monetary Fund from 2001 to 2004. Geithner paid the taxes owed for 2003 and 2004 after he was audited, and he paid the remainder of the taxes in November 2008, after President Obama chose him to be Treasury secretary.
The missing tax payments were the result of “careless mistakes,” Geithner said at the hearing.
The failure to pay the taxes was “unintentional,” but “I should have been more careful,” Geithner said.
Also at the hearing, Geithner said he wants “comprehensive regulatory reform.” Geithner did not refer directly to insurance.
Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, said he hopes to hold a committee vote on the nomination Thursday.