Chairman Christopher Dodd (D-Conn.) of the Senate Banking Committee on Tuesday introduced a draft of the long-awaited financial services regulatory reform bill. While insurance industry representatives were quick to applaud Dodd, the committee and staff on their work, they also were quick to point out concerns associated with the proposed legislation – specifically the effects the bill would have on the property/casualty insurance industry.
Leigh Ann Pusey, president of the American Insurance Association (AIA), said while the trade association continues to study the proposed legislation, it has “identified a number of concerns that if not addressed in the coming weeks would cause our organization to oppose the bill.”
Pusey said while AIA and the insurers it represents believe financial regulatory reform is needed in the wake of the financial crisis, “such reform should focus on reducing systemic risks, addressing regulatory gaps, and providing a pathway for healthy, competitive, private markets.”
Property Casualty Insurers Association of America (PCI) President and CEO David A. Sampson said that property and casualty insurance companies “are not systemically risky and did not contribute to the existing crisis.”
In a statement released by the PCI, Sampson said the “financial services regulatory reform legislation should be carefully and precisely targeted to industries that do present a clear systemic risk.”
The National Association of Mutual Insurance Companies (NAMIC) also said in a published statement that it appreciated the work of Dodd and his colleagues but also had concerns about elements of the bill.
Jimi Grande, senior vice president of federal and political affairs for NAMIC, reiterated that “property/casualty insurance played no significant role in the crisis and that property/casualty insurers inherently pose no systemic risk to the economy.”
The Dodd bill would establish a National Insurance Office to monitor the insurance industry as well as a Consumer Financial Protection Agency.
NAMIC said it remains committed to a reformed state-based insurance regulatory system, and has indicated that a properly constructed, non-regulatory federal insurance office could help streamline and create more uniformity in that system. But it “has some concern that the powers granted in the bill to this new federal office could have unintended negative consequences for consumers,” Grande said.
“In establishing a new systemic risk regulator, the Dodd discussion draft does not recognize the financial regulatory framework applicable to insurance companies and the treatment of their holding companies,” the AIA’s Pusey said.
Pusey suggested that under the current proposal, “insurance companies could also be subject to inappropriate assessments to pay for failing institutions that are under the resolution authority, and such assessments would not benefit insurers because they are already covered by state guaranty fund systems. It would be a ‘one way’ proposition for insurers who do not pose the same type of risk as others in the financial sector.”
The AIA “strongly believes” that all lines of insurance should be exempt from the jurisdiction of the new Consumer Financial Protection Agency. Under the current proposal, credit, title and mortgage insurance would be subject to CFPA supervision, the AIA said.
The AIA does concur with the need for an Office of National Insurance but would like to see it given more authority in regards to international insurance issues that the bill currently provides.
NAMIC said it welcomes the inclusion of provisions clarifying the regulation of non-admitted, or surplus lines, insurance for multi-state risks, which it said establish the home state of the risk as the primary regulator governing a multi-state risk, and provide regulatory clarity and simpler taxation.
Sources: AIA, PCI, NAMIC
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