An Oregon senator wants to narrow the international trade agreement negotiating authority that S. 3217 would give a proposed Office of National Insurance.

Sen. Jeffrey Merkley, D-Ore., has offered an amendment to S. 3217, the “Restoring Financial Stability Act of 2010,” that would replace the current ONI international agreement preemption provision.

The current version would authorize the ONI to help the Treasury secretary negotiate international trade agreements on “prudential measures,” or measurers relating to insurers’ overall financial stability. The ONI also would help the Treasury determine “whether state insurance measures are preempted by international insurance agreements on prudential measures.” The Treasury secretary could then block state laws that seemed to be inconsistent with international insurance agreements on prudential matters.

Merkley wants to replace that version of the preemption provision with narrower language that “would make preemption very difficult if not impossible to achieve” according to Tracey Laws, a senior vice president at the Reinsurance Association of America, Washington.

“We prefer the current approach in the Senate bill on the preemption language, but believe it could be improved with simple language making it clear that preemption cannot occur if it would result in a financial regulatory oversight gap or create an unlevel playing field for U.S. insurers,” says Jack Dolan, a spokesman for the American Council of Life Insurance, Washington.

The current version of S. 3217 also would give the ONI the authority to collect and analyze insurance data and to prepare a study for Congress on ideas for improving the insurance regulatory system.

Debate on S. 3217 is under way on the Senate floor. It is unclear when the amendment proposed by Merkley will be taken up.

The amendment is being introduced at the request of the National Association of Insurance Commissioners, Kansas Ciy, Mo., which opposed the version drafted by Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking, Housing and Urban Affairs Committee.

The NAIC has expressed support for the Merkley amendment in a letter sent to Merkley April 29.

The NAIC wants the Dodd language scaled backed to ensure that “international agreements are subject to appropriate review and input, and protect against unnecessary preemption of state law,” NAIC officials write in the letter.

The issue is “critical to state insurance regulators, as the Department of Treasury under the bill would, for the first time, have the power to make determinations on the preemption of state insurance measures,” NAIC officials write in the letter.

The Merkley amendment would clarify the ONI provision “to protect against unnecessary preemption of state regulation,” says Julie Edwards, Merkley’s communications director.

“Given the strides states have taken in protecting their residents, it was important to Sen. Merkley that those protections are left in place and there is more room for consultation with Congress when international agreements are being negotiated, rather than a one-size-fits all approach,” Edwards says. “State laws protecting their citizens shouldn’t be voided in order to give special treatment to foreign companies, and this amendment will make sure they won’t be.”