Trade groups representing life insurance agents and companies are divided over legislation proposed by the Treasury Department that would create an Office of National Insurance with strong authority over solvency and international issues.
Specifically, officials of the National Association of Insurance and Financial Advisors said they supported the proposal, but company trade groups cautioned that an ONI should not be a substitute for an optional federal charter for life insurers.
The legislation gives the proposed agency authority to designate insurers as systemically risky and subpoena power to collect information from insurers.
Shortly after, Treasury sent to Capitol Hill additional legislation that provides federal regulators with enhanced resolution authority over non-banks, including insurance companies.
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According to an analysis by a Washington law firm, the legislation gives the Federal Deposit Insurance Corporation and Securities and Exchange Commission resolution authority over bank and nonbank holding companies that are determined to be systemically important.
According to the analysis, this could include insurance holding companies, but specifically excludes insurance company subsidiaries of insurance holding companies.
“The proposed legislation is likely to implicate only a small number of insurance holding companies because it appears likely that there are few that would be designated as Tier 1 financial holding companies, and, moreover, the bill’s application is limited to situations in which the failure of a company and its resolution under other federal or state bankruptcy or related laws would have ‘serious adverse effects’ on the financial stability or economic conditions of the country,” said the analysis of the resolution authority legislation.
The legislation creating an ONI is considered stronger than that recently introduced in the House creating an Office of Insurance Information by specifically giving it the power to designate insurers as “Tier 1 financial holding companies,” which would trigger “systemic risk” regulatory oversight by the Federal Reserve.
The legislation creating the ONI is title V of detailed legislation dealing with preventing systemic risk in the future.
The ONI legislation deals with potential conflict with state regulators by mandating a notice-and-comment procedure outlining “potential inconsistencies.” This would permit interested parties to comment, after which the ONI will make a determination of inconsistency, and the preemption would become effective following a “reasonable period of time” to be determined by the proposed agency.
The legislation empowers the ONI to craft federal policy on the prudential aspects of international insurance matters.
It also authorizes the agency to represent the U.S. in the International Association of Insurance Supervisors.
According to the document, as part of the latter responsibility the ONI would be empowered to evaluate whether state insurance laws are preempted by “International Insurance Agreements on Prudential Measures.”