Home, auto and business insurers did not cause the current financial crisis, do not present systemic risk, and are already regulated effectively, a group of them is telling federal lawmakers looking at expanding financial services regulation.
J. Douglas Robinson, chairman and chief executive officer of Utica, N.Y.-based Utica National Insurance Group, was scheduled to testify before the House Small Business Committee today to reiterate that these types of insurers are predominantly a Main Street industry that is already stable and competitive.
In his testimony, Robinson urges legislators not to target new, consumer-costly regulations toward Main Street insurers such as his company, which insures schools, libraries, bakeries, child care centers, graphic arts businesses, small contractors, and funeral homes, among others.
He said these insurers are in good financial shape and are already under “strong and effective solvency and consumer protection regulation” at the state level.
“Property/casualty insurers have not asked for government handouts, and our industry is stable and continuing to provide critical services to local economies and their communities,” said Robinson, representing members of the Property Casualty Insurers Association of America (PCI).
Robinson is urging the Obama Administration and Congress to instead target regulatory reforms toward where the problems occurred.
“PCI commends President Obama and Congress for working to ensure that the financial crisis we experienced last fall is never repeated,” Robinson said. “Achieving this goal requires a focus on fixing what went wrong with Wall Street, without imposing substantial new, ‘one-size-fits-all’ regulatory burdens on Main Street, small businesses and activities that are not highly leveraged or systemically risky.”
According to Robinson, there are several existing regulatory proposals that would have a “substantial negative impact on small insurers and their customers” if not modified, including:
- The proposed elimination of all non-bank depository institutions, including thrifts, would unnecessarily eliminate many small, systemically non-risky financial companies that provide critical community services.
- The proposed new Office of National Insurance (ONI) is given too much subpoena and preemption power with inadequate due process or limits on its scope and its ability to enter into international insurance agreements.
- Systemic risk regulation should be modified to prevent huge, leveraged Wall Street firms from growing even larger through government bailouts and consolidation.
- Bank regulators should not be allowed to resolve systemic risk failures by reaching into the assets of insurance affiliates.
- A proposal by some members of Congress to repeal of the McCarran-Ferguson Act would significantly reduce insurance competition, primarily harming smaller insurers and diminishing consumer choice.
“The costs of new regulations almost always disproportionately affect small business,” Robinson said. “The property/casualty industry is healthy and competitive, and the current system of regulating the industry at the state level is working well. Home, auto and commercial insurers have been stable throughout the financial crisis, we specifically rejected a government bailout, and we do not need additional regulation.”
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