The Senate last week continued to weigh appropriate standards that agents should use in selling investment products.
As of press time, debate appeared to be drawing to a close on legislation that likely would serve as a future regulatory roadmap for insurance companies and agents.
Agent lobbyists focused on whether the standard mandated by S. 3217, the Restoring Financial Stability Act of 2010, would continue to be suitability or, as demanded through an amendment proposed by two senators, upgraded to the more stringent fiduciary duty.
The bill is sponsored Sen. Christopher Dodd, D. Conn., Chairman of the Senate Committee on Banking, Housing and Urban Affairs.
The suitability-vs.-fiduciary issue was just one of several insurance provisions the industry sought to reshape as the Senate version of financial services reform legislation neared its final form.
As the Senate debated the bill for the second straight week, the plan was for a motion to be offered last Thursday or Friday that would further limit debate on the bill to 30 hours.
If passed, such a move means that a final vote on the bill would occur by Tuesday, May 18.
Another critical issue to the industry was the scope of preemption authority over state rules that would be granted to an Office of National Insurance, which would be created within the U.S. Treasury Department by the legislation.
Insurers were also seeking an exemption from tough regulations mandating that derivatives used to offset interest rate risk be purchased through exchanges.
They were also seeking exemptions from a proposed provision the American Council of Life Insurers, Washington, says would “significantly disrupt investment activities essential to the running of insurance operations for insurers that own banks or thrifts.”
Insurers were also supporting an amendment proposed by four New England senators that would exempt the industry from paying for any of the costs of closing down systemically risky institutions other than insurers.
If the amendment passes, large insurers would still be subject to oversight by the Systemic Risk Council, which would be created by the legislation.
Under the amendment, if a systemically risky insurance company fails, a guaranty fund–not non-insurance financial services firms–would pay the firm’s customers.