Creation of an optional federal charter (OFC) for insurers will be on Congress’ 2011 agenda because it has strong bipartisan support, Rep. Barney Frank, D-Mass., has told state insurance legislators.
Rep. Frank, chairman of the House Financial Services Committee, made his comments about the OFC to the National Conference of Insurance Legislators (NCOIL) during their summer meeting late last month.
NCOIL provided a summary of his remarks in its monthly newsletter.
Frank said that as the committee chair, he would remain neutral during the debate. He also said the coming debate was a “not-surprising” follow-up to the massive financial services reform legislation just enacted by Congress, H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act. “The bill recognized the importance of state oversight,” he said.
The American Council of Life Insurers (ACLI) has been a strong supporter of an OFC but backed off a bit this year to focus on limiting the impact of omnibus financial services reform legislation, which life insurance companies feared was too “bank-centric.”
It was successful in carving out some exceptions, such as blanket exemption from the new Consumer Financial Protection Agency and some relief from derivatives regulations and from the so-called Volcker rule, which governs investment by financial firms in hedge funds and private equity arrangements.
A consensus of life industry lobbyists and top officials is that the while the ACLI remains an advocate of an OFC, it also recognizes that its members need to reassess their position in light of the impact of the Dodd-Frank Act on the life insurance business.
Proponents of an OFC view the new Federal Insurance Office as a stepping stone to a federal regulator, one industry official said, while opponents view the Dodd-Frank Act as reaffirming state insurance regulation.
“Many large insurers now understand that, at least for big companies, federal regulation is unlikely to be optional but would be mandatory,” said the official, a policy-maker at the ACLI. “And some question whether federal regulation would be layered on top of state regulation instead of being an alternative to state regulation. The OFC will be reexamined by the ACLI board in light of these developments.”
The National Association of Insurance and Financial Advisers is taking a cautious approach to insurance regulation, supporting an OFC in concept but saying it must ensure that any final legislation meets the needs of its members before signing on.