Although Congressional attention has been diverted by fallout from Hurricanes Katrina and Rita, key members of the House are “totally committed” to the reauthorization of the Terrorism Risk Insurance Act (TRIA), and will probably move on reauthorization before the end of the year, according to Rep. Michael G. Oxley, chairman of the House Committee on Financial Services.
Speaking today in Chicago at the annual meeting of the Property Casualty Insurers Association of America (PCI), Oxley stressed the importance of TRIA to the insurance industry and the U.S. economy in general, calling it a “travesty of enormous proportions to our economy” if the act is not extended.
Although TRIA in its current form needs fine-tuning, especially regarding full taxpayer protection and the eventual reduction of a federal backstop with pooling and a mutual reinsurance plan, passage of reauthorization legislation is essential, he noted.
Oxley also supports passage of the federal SMART act, which is designed to modernize and establish uniformity in the current state-based insurance regulatory system. Oxley stressed that passage of the SMART act would not establish an operational federal charter, as some industry critics contend. “SMART is not the end of state-based insurance regulation,” Oxley said, countering the “scare tactics” of the bill’s opponents, such as the National Association of Insurance Commissioners (NAIC). SMART has undergone more than 17 committee hearings since its introduction in 2001, and although the NAIC was initially involved in the draft, the group is now openly critical but offers no alternatives, Oxley said.
SMART is a viable alternative to federal oversight of insurance, since many state insurance regulators have been slow in adopting uniform reforms, Oxley said. And although he supports state regulation of the industry, “the status quo is not acceptable,” he added.
Oxley pointed to insurance regulation in Illinois, South Carolina and Ohio as examples of how an open insurance rating system can benefit both the industry and consumers. “Insurance is the only financial services sector subject to state price controls,” he said.
The SMART bill is currently undergoing title revisions and will be introduced after this is completed, Oxley said.
Joking that “Sarbanes is not my first name,” Oxley commented on the Sarbanes-Oxley (SOX) reform act that passed Congress three years ago in the wake of high-profile accounting scandals such as Enron and WorldCom. He emphasized that the law was designed to address publicly traded companies, not private, mutual or nonprofit organizations, and that the NAIC’s ongoing efforts to extend SOX’s requirements to these entities would have little benefit for consumers.