Insurance agents and carriers are reporting progress in their efforts to modify a proposed federal financial services regulation bill passed by the Senate Banking Committee, while risk managers have extended their support to the legislation.
Lobbyists for the Independent Insurance Agents & Brokers of America (Big “I”) were pleased that an amendment, filed by Sen. Tester (D-Mont.), which clarified that the definition of “insurer” for mandatory data collection does not include insurance agents and agencies, was attached to the act. The amendment makes it clear that only entities that issue contracts and write insurance or reinsurance are to be included.
“Without this amendment, the proposed Office of National Insurance (ONI) would have inadvertently had the ability to require countless agents and brokers to produce any data and information demanded by ONI,” said Robert Rusbuldt, Big “I” president and CEO.
Tester said his amendment ensures that individual agents, brokers and adjusters will “not have to go through the hassle” of reporting information to a federal bureaucracy.
The financial reform measure, Restoring America’s Financial Stability Act, sponsored by Sen. Christopher Dodd, D-Conn., who is chair of the Senate Banking Committee, passed the committee on a 13-10 party line vote, with Republicans opposing it. The bill will now be debated before the full Senate, where many other amendments are expected to be introduced.
While agents sought to amend the ONI provision, they do not oppose the formation of the national insurance information office within the U.S. Treasury Department. The ONI is intended to serve as a knowledge base on insurance in Washington, D.C. and represent the U.S. in international insurance negotiations. It is not supposed to interfere with the jobs of state insurance regulators.
“While the Big ‘I’ believes that the state regulatory system should be preserved and reformed, it has become evident that the state system needs assistance to effectively address some inefficiencies that exist today in the regulation of insurance,” said Charles Symington, Big “I” senior vice president of government affairs. “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 this insurance informational office adheres to these principles.”
Also included in this legislation, and supported by the Big “I,” is the Nonadmitted and Reinsurance Reform Act, which aims to streamline the regulation of surplus lines insurance and reinsurance through state-based reforms.
Property/casualty insurance carriers, meanwhile, remained concerned with the Dodd bill and are working to amend it to guarantee they are not called upon to help support a $50 billion fund that would be triggered by a major ($50 billion) financial services institution collapse. The original bill left open the possibility that some insurers could be assessed if the fund fell short.
Insurers argue that they pose no systemic risk to the economy and did not contribute to the financial crisis and therefore should not be on the hook for other financial firms’ mistakes.
The committee agreed to narrow the population of insurers that could be assessed for the fund by limiting it to any non-bank institution supervised by the Federal Reserve System, which would apply to only the very largest insurers.
But insurers still aren’t happy.
“It remains a one-way proposition for property and casualty insurers to be compelled to pay for a system that will likely never resolve an insurer — and pay for losses not incurred by an insurance company. Consistent with the approach taken in other parts of the bill, we believe insurers should not be included in the assessment mechanism at all,” said Leigh Ann Pusey, president and CEO of the American Insurance Association.
Insurance buyers, meanwhile, have thrown their support behind the Dodd bill.
The Risk and Insurance Management Society (RIMS) said it believes the legislation will promote greater efficiencies in the insurance marketplace for commercial insurance consumers, as well as require consideration of enterprise-wide risk for certain financial entities.
“The print put forth this week by Sen. Dodd is a multifaceted piece of legislation that contains critical measures that impact the U.S. economy on many fronts,” said Terry Fleming, president of RIMS and director, division of risk management for Montgomery County, Maryland. “RIMS believes its passage will usher in not only a more effective insurance market within the United States, but will also further the country’s influence abroad with regard to insurance issues.”
The bill requires large financial institutions to establish risk committees in order to ensure greater consideration of the management of risk on an enterprise wide basis. Fleming said RIMS views this requirement as recognition of the committees’ value to shareholders and to the greater financial stability of the U.S. economy.
In addition, RIMS praised the decision to include the legislation to streamline requirements for surplus lines insurance market.
RIMS also supports the creation of the federal insurance office “as a necessary first step” to helping the federal government acquire an expertise in insurance matters, as well as the ability to speak with one voice on international insurance issues. RIMS said it views this as a precursor to the creation of an optional federal charter for commercial property and casualty insurers.
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