WASHINGTON BUREAU — Sen. Jeffrey Merkley has introduced one amendment to S. 3217 – the financial services bill now on the Senate floor – that would narrow the authority of a proposed Office of National Insurance, and another that would affect proprietary trading activities.
The ONI section of S. 3217, the Restoring Financial Stability Act, would create an ONI at the U.S. Treasury Department that would gather information about the insurance industry and help the Treasury Department handle international trade agreements that involve insurance.
Lawmakers are in the process of debating a handful of the scores of S. 3217 amendments that their colleagues have filed. It is not clear how many the Senate will consider before voting on the underlying bill.
The House already has approved a major financial services bill, H.R. 4173, the Wall Street Reform and Consumer Protection Act.
The new ONI amendment that Merkley, D-Ore., has filed, S.A. 3922, would limit the authority of the ONI to preempt state insurance laws and regulations that conflict with bilateral trade agreements.
S.A. 3922 would let the ONI preempt state insurance rules over trade agreement conflicts only when the state insurance rules treated non-U.S. insurers less favorably than U.S. insurers.
The initial amendment cosponsors of S.A. 3922 are Sens. Sherrod Brown, D-Ohio; Barbara Boxer, D-Calif.; Russ Feingold, D-Wis.; Olympia Snowe, R-Maine; and Bernard Sanders, I-Vermont.
The amendment would require the ONI to consider the effect of preemption on consumer protection; on the safety and soundness of the U.S. insurance markets; and on the comprehensiveness of state financial and market conduct regulation.
The amendment would let states appeal preemption decisions to the federal courts.
Any ONI preemption action would be subject to a notice and comment period under the federal Administrative Procedures Act.
The amendment would transfer authority to conduct a study of how current insurance laws could be updated from the ONI and the Treasury Department to the U.S. Government Accountability Office.
The National Association of Mutual Insurance Companies, Indianapolis, and the Property Casualty Insurers Association of America, Des Plaines, Ill., are supporting the amendment, according to an official at a unit of Cincinnati Financial Corp., Cincinnati (Nasdaq:CINF).
The National Conference of State Legislators, Troy, N.Y., has written a letter supporting the amendment to every member of Congress, suggesting that the amendment would narrow the scope of the proposed ONI in a way that would weaken the opportunity for “mission creep.”
Eight insurance groups are opposing S.A. 3922 and encouraging senators to keep the current S. 3217 ONI language.
S.A. 3922 “would substantially weaken the Office of National Insurance’s power to address international issues that are critical to U.S. companies, and ultimately to U.S. consumers,” the groups write in the letter.
The groups signing the letter are the American Insurance Association, Washington; the Financial Services Roundtable, Washington; the Council of Insurance Agents & Brokers, Washington; the Association of Bermuda Insurers & Reinsurers, Hamilton, Bermuda; the European Insurance and Reinsurance Federation, Brussels; the American Bankers Insurance Association, Washington; the Risk and Insurance Management Society Inc., New York; the American Council of Life Insurers, Washington; and the Reinsurance Association of America, Washington.
Merkley also has teamed with Sen. Carl Levin, D-Mich., to introduce S.A. 3931, an amendment that could affect life insurers’ proprietary trading operations.
The authors of the bill are trying to impose tight restrictions on financial services companies’ ability to invest in hedge funds and private equity funds.
Merkley and Brown include a provision that would let regulators tailor the provision to “appropriately accommodate the business of insurance within an insurance company subject to regulation in accordance with the relevant insurance company investment laws while protecting the safety and soundness of an affiliated insured depository institution and the United States financial system,” according to the amendment text.
The ACLI believes the provision “would provide a very narrow exemption from proprietary trading restrictions for life insurers,” ACLI representative Jack Dolan says.
But “broad relief is needed and appropriate so we can continue serving our customers in the best way possible,” Dolan says.
Besides Merkley and Levin, S.A. 3931 is sponsored by Sherrod Brown, D-Ohio; Ted Kaufman, D-Del.; Jeanne Shaheen, D-N.H.; Dianne Feinstein, D-Calif.; Robert Casey, D-Pa.; Bill Nelson, D-Fla.; Roland Burris, D-Ill.; Mark Begich, D-Alaska; Daniel Inouye, D-Hawaii; Sheldon Whitehouse, D-R.I.; Claire McCaskill, D-Missouri; Mark Udall, D-Colo.; Barbara Mikulski, D-Md.; Bernard Sanders, I-Vermont; Tom Udall, D-N.M.; and Jack Reed, D-R.I.