Treasury Bill Includes ONI (Updated)

WASHINGTON BUREAU — The Treasury Department’s systemic risk bill could create an Office of National Insurance that would have narrow but strong authority over solvency and international issues.

The ONI section of the bill would give the proposed ONI the authority to designate insurers as systemically risky and use subpoenas to collect information from insurers.

In April, Rep. Paul Kanjorski, D-Pa., chairman of the Capital Markets Subcommittee of the House Financial Services Committee, introduced H.R. 2609, a bill that would create a federal Office of Insurance Information within the Treasury Department.

The ONI section of the Treasury Department’s bill is somewhat different from the OII bill.

The Treasury Department’s ONI provision is part of a much longer bill that would create a Financial Services Oversight Council, a body that would include all existing federal regulators and replace the current “Plunge Protection Team.” The FSOC would have the power to “facilitate coordination of financial regulatory policy and resolution of disputes and identify emerging risks in financial markets.”

The bill would subject all “Tier 1″ financial services holding companies to consolidated supervision and regulation by the Federal Reserve “regardless of whether they are owned by insured depository institutions.”

The Treasury Department’s bill would give the proposed ONI the power to designate insurers as “Tier 1 financial holding companies.”

The insurers classified as Tier 1 financial holding companies would be subject to the nonfinancial activities restrictions in the Bank Holding Company Act, whether or not they were banks. Like other Tier 1 institutions, the Tier 1 insurers also would face tougher capital, liquidity and risk management standards than those that apply to other bank holding companies.

If regulatory capital levels at a Tier 1 company declined, it would face demands for prompt corrective action, under a regime that would “mirror the prompt corrective action regime for insured depository institutions established under the Federal Deposit Insurance Corporation Improvements Act,” the Treasury Department says.

All Tier 1 companies would have to maintain a credible plan for the rapid resolution of the company in the event of severe financial distress.

The proposed ONI also would:

- Oversee the Terrorism Risk Insurance Program.

- Craft federal policy on the prudential aspects of international insurance matters.

- Represent the United States in dealings with the International Association of Insurance Supervisors, Basel, Switzerland.