Senate action on renewal of the Terrorism Risk Insurance Act (TRIA), whose authorization runs out Dec. 31, expected to come in the next several weeks, is something the life industry should pay attention to.
The life insurance industry lost the battle to be included early on, in November 2002. Congress has shown no interest whatsoever in adding protection for life insurers from a terrorist event since then, albeit how logical that might seem. For example, the Boston Marathon clearly pointed out two important things: terrorism could be home-grown, and the human toll could be high. However, I don’t think the life insurance industry believes that pointing this out to members of Congress will have any impact.
However, it shouldn’t take a rocket scientist to realize that life insurance interests, and the insurance industry in general, are maneuvering to use Senate action on reauthorization of TRIA as a vehicle to pursue their own agenda.
First, both members of Congress and officials of the National Association of Insurance Commissioners are making no secret that they want to re-establish the states as primary insurance regulators, both in shaping international regulatory standards and reducing the voice of the Federal Insurance Office and the Federal Reserve Board in insurance regulatory affairs.
TRIA reauthorization legislation, as the likely only remaining vehicle Congress will have to deal with insurance issues, is seen as the ideal vehicle to rework Sen. Susan Collins’, R-Maine, amendment to the Dodd-Frank Act (DFA) – the so-called “Collins amendment” — not only directly, but also by adding language limiting the authority of the Fed and the Federal Insurance Office to oversee insurance that revisits federal powers granted through the DFA.
The second is using TRIA reauthorization legislation to re-establish the National Association of Registered Agents and Brokers (NARAB). That has already passed the Senate this year, as part of S. 1926, the legislation the Senate wanted use to effectively repeal the disastrous Biggert-Waters Act of 2012, legislation which phased-in actuarial rates for the National Flood Insurance Program.
However, S. 1926 fell by the wayside as Congress decided to use the House version of the B-W repeal legislation as the vehicle to rid itself of that political albatross.
Conservative House members are joining NAIC officials in arguing that DFA reforms were not subjected to a cost-benefit analysis before they were enacted, they question the need to globalize a holding company capital standard, and they fear that a potential requirement for state insurance regulators to use such a standard would hurt U.S. insurers and consumers.
NAIC officials also contend that federal regulators are likely to subject large insurance holding companies designated as systemically significant as well as insurance companies which own thrifts to adopt a uniform bank capital framework in its regulation of insurance companies, which NAIC CEO Ben Nelson argues could encourage, rather than discourage, these companies to take greater risks.
Analysts expect Collins to also propose through her legislation provisions aimed at creating a larger role for the NAIC in providing input for new insurance regulations.
Industry officials believe that the likely early May action in the Senate Banking Committee will see “everyone trying to attach everything to TRIA as it’s the last and only insurance thing Congress will do for quite awhile,” as noted by one lobbyist for a life insurance company.
This lobbyist and several others see adding NARAB to the TRIA bill will be an “easy lift,” as the bill has already passed the Senate, and the full House as well.
At the same time, another lobbyist who represents life insurers says, “Congress hasn’t done that on anything in Dodd-Frank from a statutory standpoint, even if it had the support of the world.” They note that attacking the Obama administration for DFA is one thing, but taking steps to narrow DFA in the wake of the American International Group debacle is another thing. They also point out that there was strong support for some federal oversight of insurance even in the Bush administration — and the Reagan administration before that.
Several lobbyists say that the insurance industry is not united on reducing the current federal role in insurance. They caution that lessening the clout of the federal government, which has the sole statutory authority to negotiate trade agreements with foreign governments, may also give members of Congress pause.
An insurance analyst who asked not to be identified also noted that he has been told by life insurers that, “Yes, reopening anything in Dodd-Frank isn’t easy. But there’s a convergence on the Collins Amendment – everybody in the industry agrees with it; and it was her amendment to Dodd-Frank, after all, that is being interpreted to the detriment of the industry.”