Life and property and casualty insurance companies have more on their minds than terrorism risk as the Senate Banking Committee prepares to deal with legislation reauthorizing the Terrorism Risk Insurance Act (TRIA) as Congress returns to work this week.
S. 2244, is seen as the only available “engine” this year for legislation the industry sees as important, and not only because reauthorization of the TRIA is a priority for the property and casualty industry.
That’s because they also want to use the bill to limit the Federal Reserve Board’s ability to impose bank-centric rules on insurers, as well as ensure that state regulators remain relevant as international insurance rules are crafted.
Wil Rijksen, a spokesman for the American Insurance Association, said AIA “anticipates that TRIA will be a priority for both the Senate Banking and House Financial Services Committees during the next four to six weeks.”
While property and casualty insurers are concerned about provisions of the Senate bill which would phase-in an increase in the deductible for insurers from a catastrophic attack by 33 percent for each company, life companies want to use the bill to ensure the states rather than the Fed maintain primary oversight of the industry.
There are also concerns about what will happen to the Senate bill in the House in the wake of indictment of the lead sponsor of the House bill, Rep. Michael Grimm, R-N.Y., today. He was indicted in Brooklyn on federal charges of underreporting payroll while running an Upper East Side restaurant. The probe started on allegations of illegal fund-raising.
PC insurers want prompt action on the legislation, as noted by AIA president and CEO, because market uncertainty “is beginning to emerge with TRIA’s looming expiration, reinforcing the important benefit of maintaining the public-private partnership established by the law.”
No insurance industry source would speculate on the potential impact of Grimm’s legal problems on House consideration of reauthorization legislation.
But, in a letter to members of the Senate Banking Committee last week, officials of the Property Casualty Insurers Association of America and the National Association of Mutual Insurance Companies also said they want Congress to investigate efforts to impose European-style capital standards on insurance companies despite objections from U.S. state regulators.
In an investment note, Ryan Schoen and Stuart Paul of Washington Analysis expect insurers to strongly support amendments to the Senate bill that, amongst other provisions, create a larger role for the National Association of Insurance Commissioners (NAIC) in providing input for new insurance regulations.
Such a provision would likely be included in legislation Schoen and Paul expect Sen. Susan Collins, R-Maine, to introduce in hopes it is attached to the TRIA bill.
They expect her bill to seek to exempt insurers subject to federal regulation from bank-centric leverage and risk-based capital requirements, so long as their activities are subject to state insurance regulation.
They said such legislation “will quickly attract the support of the 25 senators who have co-sponsored legislation from Sherrod Brown, D-Ohio, and Mike Johanns, R-Neb., that would explicitly allow the Fed to “establish capital standards that are properly tailored to the unique characteristics of the business of insurance.”
They also expect Collins to “explicitly carve out insurers” from the Collins Amendment, with legislation she attached to the Dodd-Frank Act, which are subject to consolidated regulation by the Fed additional flexibility that would allow them the flexibility to continue using statutory instead of GAAP accounting practices.
The American Council of Life Insurers acknowledged that the industry wants Congress to scale back Fed authority over insurers.
“We understand that Congress may be considering that as an option,” said Whit Cornman, an ACLI spokesman. “There is broad support on Capitol Hill for the principle that insurers should not be subject to bank-centric capital standards.”