Word out of Washington is that insurance regulation will not be part of the sweeping new rules for the financial services sector announced by President Obama on June 17.
Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, told attendees at a fund-raiser hosted by the American Council of Life Insurers that the U.S. Treasury Department is not yet ready to weigh in on the key question of an optional federal charter for insurers. He expects his committee will delve into the subject sometime around September.
ACLI is all for it. “Treasury’s proposals to enhance oversight of the insurance sector of the nation’s economy will set us on the right path towards a modern, efficient and consumer-oriented regulatory system,” said ACLI President and CEO Frank Keating in a prepared statement.
The statement goes on to say that the White Paper released by the Treasury Department on June 17 recognizes that the 135-year-old state regulatory system is “riddled with inefficiencies, inconsistencies and unnecessary barriers to competitiveness that have not been alleviated despite sincere efforts by state regulators and the National Association of Insurance Commissioners (NAIC) to advance uniformity.”
The statement goes on to say that the lack of a federal office with responsibility and expertise in insurance hampers our effectiveness in dealing with other nations on insurance-related concerns.
“ACLI therefore appreciates Treasury’s commitment to work towards modernization of insurance regulation based on the principles of national uniformity, efficiency, effective oversight of systemic risk and better international cooperation. The White Paper identifies a federal charter as one possible way to achieve those objectives. ACLI strongly supports an optional federal charter as the only way to achieve them.”
“The goals outlined by the White Paper cannot be achieved within the existing state-by-state regulatory system. There are significant constitutional issues regarding the ability of Congress to command states to implement federal laws. Moreover, without a federal insurance office, variations in state interpretation and application of these laws are bound to occur.
“We applaud Treasury’s proposal to create an Office of National Insurance as a first step towards eventual establishment of a federal functional insurance regulator that will directly regulate federally-chartered insurers.”
Wonder how state insurance commissioners are feeling about the current environment. The nation’s 6,000 insurers are presently regulated by state and territorial governments, but with bi-partisan congressional support and support from large insurance companies, one has to believe that won’t be the case for much longer.
Many state insurance commissioners have done excellent, progressive work on behalf of consumers and the industry alike, and I hope their expertise is tapped once an Office of National Insurance becomes a reality.
(To read ACLI’s complete statement, visit www.acli.com/ACLI/Newsroom/News+Releases/NR09-054.htm.)