Amid what promises to be sweeping changes to the way the financial services industry is overseen by the federal government, many trade organizations and insiders say they feel Obama’s proposals will do the right thing.
On June 17, the President presented a white paper which, among subjects ranging from federal oversight of controversial financial topics such as mortgage lending, hedge funds and credit default swaps, also paves the way for much more federal control of the insurance industry. The document, Financial Regulatory Reform — A New Foundation: Rebuilding Financial Supervision and Regulation, released by the Treasury Department, stirred an unusually positive set of responses from groups ranging from the ALCI to NAVA.
“This will set us on the right path towards a modern, efficient and consumer-oriented regulatory program,” said Frank Keating, ACLI president. “[We] appreciate Treasury’s commitment to work towards modernization of insurance regulation, based on the principles of national uniformity, efficiency, effective oversight of systematic risk and better international cooperation.”
NAIC chief executive Pamela Banks reacted positively to sections of the proposal which would continue to maintain states’ role as regulators of insurance. “State regulations’ solvency system and consumer protections have served consumers well, as evidenced by the relative stability of the insurance market,” she says. “We are pleased that a council of regulators with functional expertise is included in the proposal, but urge inclusion of state insurance regulators to offer expertise and information on the insurance markets.”
In her response, NAVA president Cathy Weatherford says “… we need to ensure that we get effective regulation, not just more regulation. Unless it’s effective, layering on more and more bureaucracy will do more harm than good.”
NAIFA, reacting to a section which called for the harmonization of regulations regarding broker-dealers and investment advisors and a move to hold broker-dealers to a fiduciary standard of care, had this to say: “What new consumer protections will be gained by a new standard? As we have learned from recent weeks and months, there have been several instances where individuals who had a fiduciary obligation to their clients have been charged, and in some cases, found guilty of fraud. Is it possible to legislate morality?”