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June 25, 2010 at 08:00 PM
WASHINGTON–House and Senate negotiators completed work early today on sweeping financial services legislation that includes a provision that could ultimately impose a fiduciary standard on sale of investment products.
Amongst other provisions agreed to before the conferees completed work at 5:39 a.m. is one that would impose a tax on large insurance companies as well as banks and other financial services companies for 5 years.
The provision of the bill, H. 4173, would affect insurers with assets under management of more than $50 billion. It is designed to pay for the estimated $19 billion cost of the bill over 5 years. Federal regulators will assess the fee, with higher fees to be assessed on those with the riskiest assets.
Staffers were expected to work through the weekend to prepare the bill for floor action, with the House expected to act early in the week and the Senate by next Friday.
The aim, which is likely to be attained, is to have the bill on President Obama’s desk for signature before Congress leaves for its Independence Day recess July 2.
The bill would create a Federal Insurance Office, with the authority to coordinate with the U.S. trade representative in negotiating bilateral trade agreements on insurance with foreign countries–agreements that might preempt inconsistent state laws.
The office would have no regulatory authority but would have the power to monitor all activities related to the business of insurance except for health insurance and long term care insurance. That power would rest with the Department of Health and Human Services.
The final language also would require the Treasury Department to conduct a study of insurance regulation and make recommendations to Congress within 18 months. The House also added a provision requiring that the study include recommendations on the U.S. and global reinsurance markets.
The bill also contains a provision overhauling regulation of the surplus lines and reinsurance industries.
Negotiators also agreed Wednesday to a key industry request that the resolution authority established by the legislation would not be prefunded with fees imposed on financial companies. That authority would be created to wind down systemically risky financial firms.
A provision was also added to the bill that would add 2 two non-voting members to a proposed Financial Services Oversight Council–a representative from the Federal Insurance Office and a state insurance regulator. The FSOC would be created to oversee large, potentially systemically risky financial institutions.
Although final language was available, life insurers did win certain carveouts that would allow them some flexibility in dealing with the “Volcker rule,” which proposes to severely limit investment activities conducted by insurers that own banks or thrifts.
Although final language is not available, the bill contains language providing flexibility for trading activities insurers conduct in their general investment account as long as these activities are in accord with state insurance investment regulations.
That provision does provide federal regulators with authority to limit these activities if they determine if they are “overly broad,” one insurance industry official said.
