Legislation giving the federal government broad authority to deal with troubled financial institutions, including insurers, as well as a bill creating a Federal Insurance Office passed the House Financial Services Committee on Nov. 4.

The House is likely to consider the legislation very soon.

The bills are part of a package of legislation designed to reform regulation of the financial services industry.

Included in the package is H.R. 3817, the Investor Protection Act, which would give the Securities and Exchange Commission the authority to harmonize the standard of care investment advisors must use in selling investment products. Insurance agents are deeply concerned about the bill.

As for the bills passed by the House FSC panel last week, the Financial Stability Improvement Act, H.R. 3996, requires that only financial companies with assets of $50 billion or more must contribute to a fund that will be used to bail out troubled companies. It passed by a party-line vote of 31-27.

The committee also passed by a voice H.R. 2609, the Federal Insurance Office Act, which creates an office within the Treasury Department designed to coordinate dealing with international matters, provide information to the systemic risk regulator about potentially risky insurers, and collect data on insurance solvency.

Both the American Council of Life Insurers and the National Association of Insurance and Financial Advisors voiced support for creating the new office.

“The Treasury Department needs to develop expertise on a $5 trillion industry that affects the lives of tens of millions of Americans. In the aftermath of the financial crisis, it is important to eliminate the knowledge gap within the federal government,” said Frank Keating, ACLI president and CEO.

“It is also important to enhance the ability of the federal government to negotiate international insurance agreements with foreign countries,” Keating added.

As for the systemic risk legislation, prompted in part by the need for the federal government to bail out American International Group, it creates a council of federal regulators headed by the Secretary of the Treasury to recommend to the Federal Reserve Board stronger supervision of systemically risky institutions.

It grants authority to the Federal Deposit Insurance Corporation to create a fund that will be used to dissolve large, troubled financial institutions without federal assistance.

At the request of the insurance industry, an amendment was added that says the assessments are to be based upon a “risk matrix” that “takes into account” the risks presented to the financial system.

Another gives the Systemic Risk Council

the authority to monitor international regulatory developments including those developments relating to insurance and accounting.

Another amendment mandates that the domiciliary state regulator be involved in any federal regulatory decision involving higher prudential supervision of an insurance company and whether or not to subject an entity that includes an insurance company to the FDIC’s resolution authority.

One amendment transfers authority over insurance companies that own thrifts to the Federal Reserve Board from the Office of Thrift Supervision.