Eight Trades Write Congress In Support Of OFC
By ARTHUR D. POSTAL
National Underwriter News
April 29, 2009
WASHINGTON -- Eight industry trade groups supporting an optional federal insurance charter told key members of Congress in a letter yesterday that financial services regulatory reform should include a dedicated federal insurance regulator.
The letter asks that its proposal for a federal insurance regulator be considered by the appropriate congressional committees as it deals with legislation creating a systemic regulator with authority to oversee all financial services firms, not just banks.
This approach contrasts with the view of industry groups who are asking Congress to deal first with legislation creating a systemic regulator and provide a federal regulator with the authority to deal with troubled financial firms regardless of product, then deal with more comprehensive reform.
Strong and uniform federal regulation and supervision of insurance companies, producers and holding companies "would reduce costs and risks to consumers and the economy," the letter said.
"As Congress examines the creation of a financial stability regulator for all financial services institutions, it should give insurers and reinsurers the ability to be chartered and exclusively regulated at the federal level."
The letter was sent to the leadership of the Senate Banking Committee and the House Financial Services Committee.
The groups which signed the letter include Agents for Change, the American Bankers Association, the American Bankers Insurance Association, the American Council of Life Insurers, the American Insurance Association, the Council of Insurance Agents and Brokers, the Financial Services Roundtable, and the Reinsurance Association of America.
In the letter, the groups said, "While state insurance regulation should remain available for those who choose it, the current environment, coupled with the structural limitations of the state system and the fact that insurance has become a global, integrated business, underscores the need for a dedicated federal insurance regulator that can coordinate seamlessly with a market stability oversight authority and interact with other financial service regulators at home and abroad."
The letter said strong solvency regulation is central to consumer protection and that a federal insurance regulator "must have the authority to examine and address all factors material to the solvency of national insurers and reinsurers, including analyzing relevant financial data of non-insurance affiliates and insurance holding companies that may be germane to that financial regulatory authority."
The letter also called for creation of a federal guaranty agency, and said a systemic regulator should work through the federal insurance regulator.
"Federal market stability oversight should not undermine or duplicate the authority of that federal regulator," the letter said.
"Only through this coordination will a market stability overseer have the ability to both detect and work with the functional regulator to act upon market activity and business practices that may adversely impact the broader markets and economy in a timely and comprehensive fashion," the organizations said.
Their outline said a federal insurance regulator's authority should include the ability to "represent the U.S. internationally on all relevant insurance issues" and preserve the rights of states to levy "nondiscriminatory premium taxes."
It also said "federal regulation must encourage insurance companies to develop new and enhanced insurance products," and added that insurance rates should be determined by competitive market forces, rather than government rate regulation.
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