A major group for risk management professionals sent a letter to the U.S. Treasury Department, asking for a bigger federal role in regulating insurance.
The Risk and Insurance Management Society sent its letter to Michael McRaith, director of U.S. Treasury’s new Federal Insurance Office, on Wednesday. RIMS is a global nonprofit organization representing more than 3,500 industrial, service, nonprofit, charitable and government entities.
The U.S. Treasury Department has been soliciting recommendations from the insurance industry on what role the federal government should play in regulating insurance. Treasury is required to submit a report on its findings to Congress early next year. The report is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
In an official comment letter, RIMS stressed its support for more uniform and national insurance regulations. The group said such regulations would enable commercial insurance consumers to readily and affordably purchase the appropriate lines of insurance, pivotal to their organization’s economic stability and well-being.
‘Very Little Uniformity of Regulation’
“Currently there is very little uniformity of regulation of insurance as is evidenced by the state-by-state patchwork of laws related to new product approval, self-insurer requirements, collateral requirements, solvency requirements, state licensing requirements and reinsurance requirements,” said RIMS President Scott Clark.
Under current patchwork of laws, additional costs are commonly incurred by consumers; inefficiencies have become more profound, raising questions about fundamental fairness in the insurance market, he said. “The recent implementation of the surplus lines law is a great example of the confusion caused by state-by-state implementation of a Congressional directive.”
RIMS Sees ‘Inherent Weakness in State-Based System’
RIMS president said in the letter that there is an inherent weakness in the state-based system where states have the ability to legislate variances to national standards or model laws or simply apply or interpret these standards in a manner that diverges from any national standard.
He said in his letter this state-by-state disparity is compounded by the fact that the National Association of Insurance Commissioners (NAIC) is a private entity with little or no enforcement powers over the various states, except through its state accreditation program.
RIMS argues that greater federal regulations envisioned by an optional federal charter would boost uniformity for those companies that choose a national charter and would reduce redundancy for those aspects of regulation that the federal charter would preempt.
The full letter can be found at: www.rims.org/externalaffairs/Documents/Letter%20to%20Treasury%2012-15-11.pdf
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