The U.S. House Financial Services Committee has passed a measure to create a scaled-back federal office that would be a national insurance information agency with some authority in the area of international insurance agreements.
The new federal office would not have any regulatory authority over the business of insurance and would not be able to override state insurance laws.
The key committee passed H.R. 2609, the Federal Insurance Office Act of 2009, by a voice vote today.
The bill would create the Federal Insurance Office (FIO) within the U.S. Treasury Department to address two major areas that have been the focus of criticisms of state insurance regulation. First is the lack of a knowledge base or informational source in Washington, D.C. (something especially evident following the 9/11 attacks and Hurricane Katrina). Second, is the challenge state insurance regulators occasionally face in representing the United States in multilateral insurance discussions or entering into binding international agreements.
Since being introduced last spring the legislation has undergone several changes, including clarifying whether the FIO or the Treasury has regulatory or supervisory authority over the business of insurance.
“This legislation has come a long way since the summer, when we had a number of major concerns with the broad powers granted to the office,” said Jimi Grande, senior vice president of federal and political affairs for the National Association of Mutual Insurance Companies (NAMIC). “In addressing those concerns, the legislation has moved back towards its original purpose of providing insurance expertise and information to federal policymakers.”
Originally introduced by Rep. Paul Kanjorksi, D-Pa., last spring, the legislation would have created an Office of Insurance Information to provide policymakers with the resources and information they need in making policy decisions. However, changes were made during the summer to bring the bill more in line with the Office of National Insurance (ONI) proposed by the Obama Administration that would have granted broad powers to the office and increased the likelihood that it could become a de facto federal regulator, according to NAMIC.
The bill now contains specific language that the bill does not establish a supervisory or regulatory authority over the business of insurance and bars the FIO from pre-empting state insurance laws governing rates, premiums, coverage requirements, antitrust laws, underwriting or sales practices.
“This clear prohibition of regulatory activity respects the primacy of the state-based insurance regulatory system while still providing a nationwide view of the insurance industry to federal policymakers,” Grande said.
The committee also amended the legislation to clarify that the definition of “insurer” under a mandatory data collection provision does not include insurance agents and agencies.
“Without this amendment, the newly created Federal Insurance Office (FIO) would have inadvertently had the ability to require countless agents, brokers, and adjusters to produce any data and information that the FIO might demand,” said Robert Rusbuldt, Big “I” president & CEO.
Leigh Ann Pusey, president and CEO of the American Insurance Association (AIA), said today’s vote is a good first step but her group believes that the federal government still needs to have the ability to create and empower an office that will understand how the insurance industry works, how it handles risk, utilizes capital, and meets the needs of its customers.
“The current state-based insurance regulatory system is not well-suited to bridge information or regulatory gaps that may arise in today’s complex and global economy,” Pusey said. “Creation of a Federal Insurance Office will help prevent future financial crises from occurring and will identify potential regulatory gaps that exist in the current financial regulatory structure.”
Agents, who believe that the state regulatory system should be preserved but agree it needs reform and assistance to address inefficiencies, support the bill as now written.
“The Big ‘I’ has long supported the use of targeted federal legislation to help reform the state system without creating a federal regulator, and we believe H.R. 2609 adheres to these principles,” Charles Symington, Big “I” senior vice president of government relations.
The subpoena authority given to the FIO under the administration’s proposal also was removed. In the version passed by the committee, the FIO can request data from an insurer only after first checking with state regulators and the National Association of Insurance Commissioners that the required information is not already publicly available.
Also, language proposed by the administration providing the office with broad authority to enter into international trade agreements has been clarified to require cooperation from the U.S. Trade Representative and consultation with Congress.
“A necessary element of this legislation is the authority to negotiate international agreements on prudential insurance matters,” AIA’s Pusey said in a statement. “While we remain supportive of the creation of this office, we still have concerns that the language contained in the current version of this legislation will not provide the office with the adequate authority it needs. Without such authority, it could limit the federal government’s ability to advocate our industry’s interest at the international level.”
Sources: AIA, NAMIC, IIABA