WASHINGTON BUREAU — The New York Times said today in an editorial that Congress should reject legislation creating an optional federal charter for insurance, calling the OFC approach a recipe for “regulator shopping.”
Officials of two life industry trade groups criticized the Times’ view.
The American Council of Life Insurers, Washington, says the paper “has it wrong.”
The Financial Services Roundtable, Washington, says the “editorial mirrors misstatements frequently made by business interests” that oppose H.R. 1880, the “National Insurance Consumer Protection Act.”
The bill, introduced by Reps. Melissa Bean, D-Ill., and Ed Royce, R-Calif., would create an optional federal charter.
Advocates of the OFC approach want to let insurers choose between being regulated by state insurance regulators or being regulated by a new federal insurance regulatory system.
The Times editorial refers directly to the Bean-Royce bill, saying the rationale for the proposal “is as meritless as the proposal itself.”
“If the bill were enacted, the race to the regulatory depths would continue, and the nation would be headed in exactly the wrong regulatory direction,” the Times says in the editorial.
The sponsors say the bill is needed because the government is providing funds to bail out troubled American International Group Inc., New York.
“That doesn’t compute,” because the insurance businesses at AIG didn’t falter during the financial crisis, and remain solvent and functional to this day,” the Times says.
“There are many problems with state regulation of insurance–it is inefficient for insurers and inconsistently applied by the states–but it has done a good job ensuring the safety and solvency of insurance operations, something that can’t be said about federal bank regulation,” the Times says.
The ACLI disagrees with the editorial, ACLI spokesman Jack Dolan says.
“The life insurance industry is asking Congress to pass legislation creating an OFC in which consumer protections meet the highest state standards,” Dolan says. “If we wanted to engage in regulatory arbitrage, we could do it now under the state-based system. But we don’t that.”
At the Roundtable, spokesman Peter Freeman says, “The notion that a company which has migrated to a single, uniform regulator would return to the patchwork of 50 states, strains credibility and shows a lack of knowledge about the difference between banking and insurance.”
The “editorial is misleading at best, and obstructs a discussion about the real debate – how do we create state of the art regulation and the highest levels of consumer protection?” Freeman says.