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NU Online News Service, Nov. 11, 9:05 a.m. EST
WASHINGTON—Property and casualty insurance trade groups are lauding Senate Democrats’ decision to include provisions modernizing and reforming the surplus lines industry in legislation they unveiled for financial services regulatory reform.
But, other aspects of the so-called “Restoring American Financial Stability Act” are raising concerns. The bill was rolled out by Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, and several other committee Democrats.
The American Insurance Association said it has “identified a number of concerns that if not addressed in the coming weeks would cause our organization to oppose the bill.”
Leigh Ann Pusey, AIA president and CEO, voiced particular concern with provisions establishing a new systemic risk regulator.
Officials of the Property Casualty Insurers Association of America (PCI) supported the AIA in voicing concern over the resolution authority provision.
Ms. Pusey said the discussion draft “does not recognize the financial regulatory framework applicable to insurance companies and the treatment of their holding companies.”
She said, “This differs fundamentally from the bank-centric approach to heightened prudential supervision, which the Dodd discussion draft embraces.”
David A. Sampson, PCI president and chief executive officer, noted, “As the bill moves forward, we would reiterate that home, auto and business insurers are not systemically risky and did not contribute to the existing crisis.”
He added, “We believe that financial services regulatory reform legislation should be carefully and precisely targeted to industries that do present a clear systemic risk, and we look forward to working with the chairman, his colleagues and his staff toward that end.”
AIA also mentioned its concern that a portion of the bill creating a new Consumer Financial Protection Agency specifically includes credit, title and mortgage insurance.
The organization said the portion of the bill creating a National Insurance Office does not provide that agency with “adequate ability to be an authoritative national voice in international discussions, or to effectively engage in negotiations on important prudential insurance matters, such as Solvency II, that will determine the future global competitiveness of the U.S. insurance industry.”
Charles Symington, senior vice president, government affairs for the Independent Insurance Agents and Brokers of America, said his trade group wants the NIO office authority narrowed to remove its subpoena and enforcement provisions.
The House version of the legislation, which created a Federal Insurance Office, has had those provisions removed.
“We are currently analyzing the legislation and its impact on our members. At first blush, we do see some areas where it can be improved, particularly the Office of National Insurance provisions,” Mr. Symington said.
“We look forward to working with the chairman and other members of the Senate Banking Committee to make the bill acceptable to our 300,000 agents and their employees,” he added.
Officials of the National Association of Professional Surplus Lines Offices “applauded” the decision of Senate Democrats to include legislation modernizing and reforming the surplus lines industry in the bill.
“The Senate Banking Committee’s action is a giant step toward realizing the goal of a more efficient process for transacting surplus lines business for both consumers and insurance professionals,” said NAPSLO President Marshall Kath.
Richard Bouhan, NAPSLO executive director, added, “NAPSLO has been in the forefront of the effort to streamline the surplus lines marketplace for a number of years, and we are beginning to see the ‘light at the end of the tunnel’ from this effort with today’s Banking Committee action.”
The National Association of Mutual Insurance Companies (NAMIC) said Sen. Dodd “should be applauded” and, “while we may have some concerns about this bill, NAMIC understands that the economic crisis of the past year was the result of complex problems that will require complex solutions.”
A properly constructed, non-regulatory federal insurance office could help streamline and create more uniformity, said NAMIC, but it has concerns “that the powers granted in the bill to this new federal office could have unintended negative consequences for consumers.”
Besides insurance provisions, the Dodd bill would call for far more sweeping changes in financial services regulation than proposed by either the Obama administration or House Democrats.
Specifically, it proposes to create a new super bank regulator, to be called the Financial Institutions Regulatory Administration, or FIRA.
It would consolidate the bank supervisory powers of four current regulators and abolish the Office of Thrift Supervision and the Office of the Comptroller of the Currency. The Federal Deposit Insurance Corp and the Federal Reserve would lose their roles as direct bank supervisors.
Sen. Dodd's bill also calls for creating a financial stability agency. Previous proposals have focused on establishing a council of existing regulators to police systemic risks.
It would also create a Consumer Financial Protection Agency.