WASHINGTON BUREAU — The Treasury Department believes any Federal Insurance Office legislation will let the FIO preempt state laws that conflict with international trade agreements on the sale of insurance.
Michael Barr, assistant secretary of the Treasury for financial institutions, gave that assessment Thursday here at an ALI-ABA Conference on Life Insurance Company Products.
“We firmly believe that with respect to international agreements on financial matter that there should be an appropriately tailored, narrow preemption provision associated with it so that, when there is a state law provision that is in conflict with an international trade agreement on discriminatory treatment of a foreign firm, there is a method for dealing with that,” Barr said.
But, in most cases, the FIO office would go through the National Association of Insurance Commissioners, Kansas City, Mo., when seeking information about insurers and the industry, Barr said.
The only exception would be when the FIO was seeking the information needed to assess the health of potentially systemically-risky insurers, he said. That information would be sought only from holding companies, not insurance subsidiaries, he added.
The FIO “is not a regulator in any sense,” Barr said. “It will have no examination authority.”
Congressional staffers and industry lobbyists have said in recent days that because of concerns raised by various parties, all preemption language in the FIO bill would be removed.
But “that is certainly not my understanding of what we proposed, and it is not my understanding what the House Financial Services Committee intends to do,” Barr said.
Barr said that is also not his understanding as to what the U.S. Trade Representative and House Ways and Means Committee leaders want.
Barr also touched on the argument that insurers would have no voice on the Systemic Risk Council that would be created by another piece of legislation, the Financial Stability Improvement Act bill.
The House Financial Services Committee, which has jurisdiction over the FIO bill, is marking up the FSIA bill draft today.
Barr said he himself would oversee the FIO and report to the Treasury secretary.
“And the secretary of the Treasury will be representing the FIO on the oversight council,” Barr said.
Rep. Spencer Bachus, R-Ala., the highest-ranking Republican on the House Financial Services Committee, asked Thursday during debate on the FSIA bill draft that state insurance and banking regulators be permitted to have a vote on the council.
The original version of the FSIA bill draft would let representatives for state insurance regulators and state banking regulators serve on the council in advisory roles.
Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said he supports some role for state insurance and banking regulators on the council, adding that non-voting members “should have full weight” on the council.
But there are “constitutional limitations” on the role that state regulators could play on the council, Frank said.