In a letter from the National Association of Insurance Commissioners (the “NAIC”) to both House and Senate leaders, state insurance commissioners urged lawmakers to designate a non-voting seat for state banking, insurance and securities regulators on the Financial Stability Oversight Council (the “FSOC”).
NAIC President and West Virginia Insurance Commissioner, Jane L. Cline, stated in a press release that the FSOC will be a regulatory body, which “demands the commitment, expertise, and regulatory data that only an active state insurance commissioner can bring.” Further, according to Ms. Cline, “the inclusion of a state insurance regulator will aid considerably as an early warning system in identifying practices and risk-related trends that contribute to systemic risk.”
Federal Insurance Office
The NAIC’s letter also expressed support for inclusion of the House’s Federal Insurance Office (“FIO”), last discussed here, rather than the Senate’s Office of National Insurance (“ONI”), last discussed here, in the final reconciled financial reform bill. According to the NAIC, the laws establishing such an office, housed in the U.S. Department of the Treasury, would (i) provide the federal government with information and expertise on the insurance sector, (ii) ensure that international agreements are subject to appropriate review and input, and (iii) protect against unnecessary preemption of state law. According to the NAIC, the House’s FIO has limited preemptory powers that are “only as broad as necessary to achieve the narrow objectives of the office [with] appropriate procedural safeguards . . . in place to protect against any broadening of that preemptive effect.”
Consumer Protection Agency, Resolution Authority, and Proprietary Trading
The NAIC’s letter also made the case for why the House version’s consumer protection agency should not regulate the areas of federal law that affect insurance companies (e.g., the Gramm Leach Bliley Act), for why insurers should be excluded from the systemic resolution authority as insurance consumers are already protected by the state guaranty fund system, and why any new rules set forth in the final reform bill should allow insurers to continue to invest policyholder premiums in accordance with state investment laws.