WASHINGTON BUREAU — Life groups today are asking Congress to create a Federal Insurance Office, and the National Association of Insurance Commissioners is saying regulators might support a FIO bill, if the bill left solvency issues to the states.
The American Council of Life Insurers, Washington, and the NAIC, Kansas City, Mo., are sending witnesses to a House Financial Services Committee hearing on Obama administration financial services proposals.
The hearing includes separate panels on 3 components of the proposals: investor protection; oversight over private pools of capital; and creation of a National Insurance Office.
Rep. Paul Kanjorski, D-Pa., chairman of the Financial Services Committee’s capital markets subcommittee, has introduced a revised version of H.R. 2609, the Federal Insurance Office Act, which would create a new Federal Insurance Office that would be similar to the Obama administration’s NIO.
The FIO bill would “provide national policymakers with access to the information and resources needed to respond to crises, mitigate systemic risks, and help ensure a well functioning financial system,” Kanjorski says in a written version of his opening statement posted on the committee website.
The credit meltdown highlighted the lack of expertise within the federal government regarding the insurance industry, Kanjorski says.
NAIC Chief Executive Officer Therese Vaughan says state insurance commissioners could support creation of an FIO that focused on handling international agreements and systemic risk.
“We fully support the goal of creating a national insurance office as a resource for the federal government and a conduit for the states, but we will strongly oppose any efforts to use such an office as a precursor to establishing a federal insurance regulator,” Vaughan says in the written version of her remarks.
NAIC support for the new office is “predicated on the notion that the office be a tool to connect the state regulatory system with the federal regulatory system, and not be an instrument to diminish state insurance regulation,” Vaughan says.
Earlier versions of legislation creating a federal insurance office “made clear that the office would not create a supervisory role over insurance at the federal level, and we urge inclusion of identical language into any final legislation,” Vaughan says.
Dennis Herchel of Massachusetts Mutual Life Insurance Company, Springfield, Mass., is set to represent the ACLI at the hearing.
The ACLI and MassMutual support H.R. 2609, Herchel says in the written version of his testimony.
The FIO would be the federal government’s repository of insurance industry information and the U.S. representative on international insurance issues, and it “would not have any supervisory or regulatory authority over any insurer doing business in the U.S.,” Herchel says.
But the ACLI and MassMutual would like to see the proposed FIO given a higher status, “so that it can participate actively and effectively with federal financial industry regulators, including a systemic risk regulator, under any new systemic risk regulatory paradigm that may be implemented,” Herchel says.
The FIO should have a seat on the proposed Financial Services Oversight Council, and it should have a role equivalent to that of “federal functional regulators” when it comes to working with any systemic risk regulator on matters relating to systemic risk, Herchel says.
NAIFA will not have a witness testifying at the hearing, but it has submitted a written statement backing the FIO bill.
The FIO bill is an “important step in advancing insurance expertise and understanding at the federal level, and in bringing some degree of uniform treatment in terms of international insurance regulatory and trade matters,” NAIFA says.