The American Council of Life Insurers and the National Association of Insurance Commissioners both say they found points to like when Treasury Secretary Timothy Geithner spoke Thursday.
Geithner appeared at a House Financial Services Committee hearing to unveil the Obama administration’s plans for changing the way “systemically important” financial institutions are regulated.
The ACLI, Washington, has issued a statement from ACLI President Frank Keating noting that Geithner spoke favorably about the concept of creating an “optional federal charter” for insurers, or giving insurers a choice between state and federal regulation.
Geithner said there’s a “very good case” to be made for the OFC concept.
“Optional federal charter legislation is inextricably linked to proposals by the secretary and other policymakers to enhance the federal government’s ability to monitor and address potential threats to our nation’s financial services system,” Keating says in the ACLI statement.
“Without the federal insurance regulatory office that would be established by OFC legislation, any effort to oversee systemic risk would necessarily fall short,” Keating says. “Life insurance is a $5 trillion industry…. The federal government must develop the expertise and the structure to monitor the life insurance marketplace and understand how life insurers interact with other financial institutions and American consumers.”
The NAIC, Kansas City, Mo., issued a statement by its own president, New Hampshire Insurance Commissioner Roger Sevigny, noting the Geithner said the regulatory proposal “will maintain the important role that state regulators play in supervising insurance companies.”
“We agree with his assertion that financial institutions must not be allowed to ‘cherry pick’ among competing regulators in search of the lowest standards and constraints,” Sevigny says. “We also agree that there is a need to address how resolutions would operate for financial structures and activities outside of the existing [Federal Deposit Insurance Corp.] system for banks and the existing state guaranty fund system for insurers.”
But “any expansion of federal resolution authority should not displace those proven systems,” Sevigny says. “State insurance regulators have a long history of consumer protection, proven solvency oversight and fostering market stability. Any action at the federal level to regulate financial stability should be collaborative, transparent and inclusive.”
Sevigny notes that the NAIC has developed its own principles for systemic risk regulation, as it relates to insurance.
Insurance regulators say any proposals should incorporate:
- Consumer access to state-based regulatory officials.
- Formalized state and federal collaboration to regulate financial conglomerates.
- Limited and extraordinary federal financial-stability regulatory authority, exercised in conjunction with functional regulators.
NAIC principles for general insurance regulatory modernization efforts include:
- Creating uniform standards where appropriate; local or regional where necessary.
- Continuing to give states responsibility for standard setting and enforcement as well as managing taxes and fees.
- Giving insurance regulators equal standing with other regulators; formalizing collaboration with federal financial-services regulators, and allowing for full participation in information sharing.
- Fostering collaboration with international insurance and financial-services regulators on matters related to the U.S. insurance marketplace.