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NU Online News Service, Nov. 10, 2:34 p.m. EST
WASHINGTON—The chairman of the Senate Banking Committee unveiled an omnibus financial bill that would require a study of ways to modernize insurance regulation and creation of an Office of National Insurance.
Sen. Chris Dodd, D-Conn., in his legislation titled “Restoring American Financial Stability,” also calls for enactment of the Nonadmitted and Reinsurance Reform Act of 2009.
That measure would reform and streamline regulations for nonadmitted commercial surplus lines insurers and reinsurers. It would put surplus lines transactions, which involve unusual and difficult risks, under a single set of regulations—those of an insured’s home state or principal place of business—regardless of the location of the risk. It would also assign primary responsibility for regulation of a reinsurance transaction to the insured’s home state and forbid application of other state laws.
An insurance industry lobbyist with knowledge of the senator’s timetable said a discussion draft would be updated next Monday based on comments on the draft, and that Sen. Dodd hopes to start the drafting markup process for the bill next Tuesday.
Insurance industry representatives said they have deep concerns regarding language requiring large insurers to contribute to the resolution of large insolvent financial institutions, whether they are insurers or other types of financial institutions.
A similar provision is contained in legislation that the House Financial Services Committee will be working on next week.
The bill would also mandate heightened consumer protections for sale of securities and insurance products by the Securities and Exchange Commission, state securities regulators and state insurance regulators.
Those provisions include a requirement that the SEC guard against misleading designations being used to sell investment products to seniors. It also provides grants to states to adopt strong consumer protection and suitability mandates on sale of annuities and other investment products.
The provision creating a national insurance office is similar to the draft language submitted to Congress by the Treasury Department, but adds subpoena and enforcement provisions removed from the House bill.
The bill also includes language similar to the House proposal, explicitly stating that the proposed insurance office would not be a regulator and would be without authority to preempt any state laws or actions by other federal agencies dealing with insurance.
In dealing with another controversy triggered by the House bill creating a national insurance office, the Dodd bill includes a savings provision stating that nothing in the bill shall be construed to affect the development and coordination of United States international trade policy or the administration of the United States trade agreements program.
It also includes a requirement that the Treasury Secretary must consult with the office of the United States Trade Representative prior to initiating and concluding an International Insurance Agreement on Prudential Measures—those that provide a legal framework for financial operations.
Regarding the proposed study of insurance regulation, the proposed measure calls for an examination of “how to modernize and improve the system of insurance regulation in the United States” that would be conducted by the insurance office, which would make recommendations to Congress.
It also says that in conducting the study, the Treasury Department should “consult with the National Association of Insurance Commissioners, consumer organizations, representatives of the insurance industry and policyholders, and other organizations and experts, as appropriate.”
Joel Wood, senior vice president of government affairs for the Council of Insurance Agents and Brokers, said his organization is gratified that Sen. Dodd put the surplus lines provisions of the Nonadmitted and Reinsurance Reform Act in his discussion draft.
He said placement of surplus lines products on a multistate basis “is a process fraught with conflicts and unnecessary duplication. Over the last five years, we’ve worked hard to help build a consensus among all of the major stakeholders that this legislation needs to be approved.”
He said the key stake holders-including the National Association of Insurance Commissioners and the Risk Insurance Management Society- have been "extremely constructive in getting us to the point where the surplus lines provisisions can be seriously considered" by Senate Banking Committee Republicans and Democrats.