The House Subcommittee on Capital markets, Insurance and Government Sponsored Enterprises (the “Subcommittee”) and the House Committee on Financial Services (the “Full Committee”) approved three insurance regulatory bills on July 9, 2008. This post provides updates on the three bills that have most recently advanced Congress’ examination of proposals to institute federal oversight of the insurance industry.
H.R. 5840: to establish an Office of Insurance Information in the Department of the Treasury
This bill is part of the major regulatory reform proposed by the U.S. Department of the Treasury earlier this year in the Department of the Treasury Blueprint for a Modernized Financial Regulatory Structure (the “Blueprint”). To see our first report on the Blueprint, click here. Our most recent report on the development of H.R. 5840 is available here.
On July 9, 2008, this proposal was approved by both the Subcommittee and the Full Committee by voice vote. There were no significant revisions at either stage. The current version is of the bill available here.
Sandy Praeger, President of the National Association of Insurance Commissioners (the “NAIC”), issued a statement the same day critiquing the bill, "Some members of Congress and industry lobbyists have made claims that this bill is the first step to an 'optional federal charter' [(“OFC”)] for insurance . . . . Every insurance commissioner strongly believes that an OFC is the worst possible public policy choice for insurance. An OFC would decimate consumer protections via arbitrage, would damage the world’s most competitive insurance market and would result in a massive expansion of the federal government. The NAIC unequivocally opposes any attempts to use this bill as a vehicle for such a misguided policy."
Meanwhile, the bill has been supported by the American Insurance Association (the “AIA”), which also issued an official statement after the vote. AIA President Marc Racicot said, “The Office of Insurance Information could be a tremendously valuable tool for enabling the U.S. to speak with one voice on important insurance matters and for establishing U.S. leadership globally on developing international standards for insurance regulation.”
H.R. 5611: to Reform the National Association of Registered Agents and Brokers, and for other purposes
Representative David Scott (D-GA) introduced H.R. 5611 on March 13, 2008, 12 days before the Treasury Secretary revealed the Blueprint. The proposal amends the Gramm-Leach-Bliley Act by reestablishing the National Association of Registered Agents and Brokers (“NARAB”) as a non-profit corporation. Additionally, the bill aims to preserve the right of the states to license, supervise, and discipline insurance producers as well as promulgate and enforce laws and regulations protecting consumers. Essentially, this bill would streamline nonresident insurance producers’ licensing processes.
Although introduced independently, Congress has incorporated H.R. 5611 into the general examination of insurance regulation. We previously reported on this development here. Since then, no action was taken on H.R. 5611 until July 9, when it was referred to the Subcommittee. Shortly thereafter, the bill was approved and the Full Committee also approved it that same day. There were no significant revisions at either stage. The current version is available here.
Praeger also commented on the significance of this bill, "The NAIC recognizes that streamlined nonresident producer licensing is an important goal, and we believe that the targeted approach taken by the manager’s amendment to H.R. 5611 achieves that objective without compromising State consumer protections." However, Praeger’s support was conditional, "Although the NAIC is supporting the latest version of the legislation, this is a unique case and should not be misinterpreted to support any further preemption of state laws. Insurance regulatory reform should always begin and end with the states."
Another advocate of state regulation is the Independent Insurance Agents & Brokers of America (the “Big ‘I’”), which has been largely opposed to any federal regulation. However, Charles E. Symington, Jr., Big “I” senior vice president of government affairs issued a statement in support of H.R. 5611, “We believe that this type of targeted federal legislation makes the appropriate reforms to the marketplace and improves insurance regulation without having to take the unprecedented path of creating a new federal regulator.” Symington continued, “As indicated by the industry and congressional support for these bills and the Subcommittee’s action today, targeted reform is the most viable option for insurance regulatory reform. When enacted, the NARAB bill will result in a more efficient and effective regulatory system, which is good for consumers.”
H.R. 5792: to amend the Liability Risk Retention Act of 1986 to increase insurance competition and available coverage for consumers
This bill codifies the NAIC’s proposed corporate governance standards for risk retention into law by amending the Liability Risk Retention Act of 1986 such that risk retention groups offering commercial property insurance will be covered. We first discussed H.R. 5792 here. This bill was also incorporated into the general examination of insurance regulation proposals, as we discussed here.
On July 9, 2008, the Subcommittee and Full Committee approved H.R. 5792 by voice vote. There were no significant revisions at either stage. The current version of the bill is available here.
The NAIC has yet to take a formal position on this bill.