Keating, McRaith Clash On State Role

Keating did not talk about an OFC proposal. He talked about a “federal insurance regulatory authority” without defining whether the authority would be a separate agency or through an existing federal regulatory entity.

“We urge Congress to recognize the systemic importance of our industry to the economy and to the retirement and financial security of millions of consumers and tailor reform and stabilization initiatives accordingly,” Keating said. “Failure to do so runs the very real risk of doing grave harm to both…. If there are insurance firms that are deemed systemically significant, the question arises as to how the federal systemic risk regulator will be able to coordinate effectively with multiple state insurance regulators?

“How will federal policy decisions be effectively coordinated with state regulators who need not adhere to those policy decisions and who may differ among themselves regarding the standards under which insurance companies should be regulated?”

Moreover, Keating said, state insurance regulators do not have the authority to set U.S. policy on insurance regulation or negotiate and enter into treaties and other agreements that address global financial regulatory issues.

“To be clear, any reforms to functional insurance regulation should start and end with the states,” McRaith said.

“Federal assistance may be necessary if targeted to streamline insurance regulator interaction and coordination with other functional regulators, but that initiative should not supplant or misplace the state regulatory system,” McRaith said.

“The insurance industry, even in these difficult times, has withstood the collapse that echo through other financial sectors,” McRaith said.

“Vigilant, engaged and effective prudential supervision by the states” has fostered “insurance marketplace stability, and we urge caution in any federal initiative that may jeopardize the state-based platform for such oversight,” McRaith said.

But Keating argued that “crisis-related decisions at the federal level too often produced significant adverse effects on life insurers.

“These decisions occurred with little or no understanding of their effects on life insurers due to the absence of a federal insurance regulatory authority,” Keating said.