optional federal charter (OFC) for the US insurance industry rages
on, federal involvement in the industry is set to take a
significant step forward with congressman Paul Kanjorski’s
introduction in April of the Insurance Information Act of 2008
(IIA).
The IIA would create a federal Office of Insurance Information
that would represent the US internationally on insurance issues and
coordinate with state insurance regulators on national
concerns.
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Frank Keating, president and CEO of the American Council of Life
Insurers, is a strong supporter of both an OFC and the IIA. He
explained that only the federal government has the legal authority
under the US Constitution to represent and commit the US to
international regulatory mutual recognition agreements on
reinsurance, solvency and binding international standards.
Providing insight into the rationale for his introduction of the
IIA, Kanjorski – current chairman of the House’s financial
services capital markets, insurance, and government-sponsored
enterprises sub-committee – said he had long felt the federal
government lacked expertise on insurance policy.
“The Office of Insurance Information would provide an effective way
to help Congress and federal government make better decisions
regarding national and international insurance policy,” said
Kanjorski.
The Office of Insurance Information would:
• Collect and analyse data on insurance;
• Advise the Secretary of the Treasury on major domestic and
international policy issues;
• Report to Congress every two years;
• Establish federal policy on international insurance matters;
and
• Ensure state insurance laws remained consistent with federal
policy in coordinating international trade agreements.
“Domestically, many of the key issues underpinning the life
insurance industry – retirement security, tax policy and long-term
care policy – are addressed in Washington, not in the states,” said
Keating.
“It is crucial the federal government establishes an office that
can provide expert advice to policymakers on how legislation in
these key areas will affect insurance consumers.”
Keating continued that, while the office of the US Trade
Representative “is an excellent advocate on behalf of US insurers
seeking entry into foreign markets”, its lack of expertise “leaves
a large gap” in the insurance industry’s representation of
financial services issues.
He stressed this situation is “an increasing source of friction
with major economic nations around the world”.
Among others applauding the IIA were congressman Ed Royce and
congresswoman Melissa Bean. Together they introduced the National
Insurance Act in July 2007, legislation that would create optional
a national regulator for insurers and an OFC that would enable
insurers to choose between state and federal regulation.
“An Office of Insurance Information would solve many of the
problems experienced throughout the sector – especially with
respect to global competitiveness,” said Royce.
“I believe it would move us one step closer to establishing an
optional federal charter for insurance which would provide a
much-needed regulatory alternative to the tangled bureaucratic web
of state-based insurance regulators.”
Bean added: “Chairman Kanjorski’s plan for an Office of Insurance
Information is a vital step toward reforming our antiquated system
of state insurance regulation, which puts the United States at a
disadvantage in the global marketplace.”
However, support for the IIA is not universal. Among its most
outspoken critics is the National Association of Professional
Insurance Agents (PIA), an industry body also strongly opposed to
an OFC.
“Far from being benign as its title suggests, the Office of
Insurance Information would have broad authority to pre-empt state
laws and set national insurance policy,” said PIA executive
vice-president and CEO Len Brevik.
“It is, in fact, a federal insurance regulatory agency. Calling it
an information office is a misnomer.”
To support his assertion Brevik pointed to a specific clause in the
IIA that states: “Any law or regulation of any state is pre-empted
to the extent that such law or regulation is inconsistent with
Federal policy on international insurance matters set forth in an
agreement entered into by the United States or on its behalf by a
designated representative [including the Secretary of the Treasury
and the US Trade Representative] with a foreign government or
regulatory entity.”
Brevik commented: “This provision in the bill could not only lead
to insurance regulation by decree on the part of the Secretary of
the Treasury, but it also would allow foreign governments
throughout the world to pre-empt the laws of any state in the
United States, simply by getting the Secretary of the Treasury to
agree. This is outrageous.”
Criticism of the IIA also came from the National Association of
Mutual Insurance Companies (NAMIC) which believes an OFC
would do little more than add additional regulatory burdens and
costs. The introduction of the IIA “smacks of the beginnings of
dual regulation,” said NAMIC senior federal affairs director Justin
Roth.
