|Copyright:||A.M. Best Company, Inc.|
The federal office for monitoring the insurance industry is closer to fruition, with only two remaining points left to be worked out between U.S. senators and House members who are putting together the final unified financial reform bill. However, those points are significant, involving the authority the office would have to override state law when securing international insurance deals on behalf of the U.S. industry.
So far, the House and Senate versions of the office have been largely meshed together, agreeing on several key points:
— This office, within the U.S. Department of the Treasury, would be called the Federal Insurance Office.
— Treasury would have to work jointly with the U.S. Trade Representative in securing international insurance agreements, and those agreements would require consultation with relevant congressional committees.
— The office, which would have the authority to request and collect market information from insurers, would first have to determine whether it can get that information elsewhere.
These were all changes requested by House negotiators and granted. “The Big I is pleased that those changes are agreed to by the conferees, because they do improve the legislation,” said Charles Symington, senior vice president of government affairs for the Independent Insurance Agents & Brokers of America.
But the Senate conferees declined to bend on two House requests involving pre-emption of state laws. “I think there’s fairly strong sentiment in the House on those,” said Rep. Barney Frank, chairman of the House Financial Services Committee and the leader of the House conference team, who said the National Association of Insurance Commissioners had also weighed in on the House’s side. He called this is a “very strong disagreement,” but both sides suggested there is room to move on the remaining issues.
First, the House negotiators want a “de novo” judicial review of the insurance office’s decisions regarding state laws requiring override. The de novo judicial review would put legal challengers on even footing with the federal office, rather than allowing court proceedings to give more deference to the office’s decisions.
The Property Casualty Insurers Association of America has been arguing in favor of this more rigorous form of review, which helps counter what PCI thinks is an overly powerful authority in the Senate’s version, said Ben McKay, PCI’s senior vice president of federal government relations. “That gives you due process that is lacking in the senate bill,” said McKay, who argued the insurance office would otherwise be acting as if it’s a component of all three branches of government. “A very broad power to enter into international agreements with no checks, it takes away the opportunity for private citizens to have input,” he said. “It just doesn’t seem right.”
The second point is the House’s request to replace the Senate version’s wider authority for international agreements with the House’s version, which requires regulations to be “substantially equivalent” to state regulations, putting much greater limitations on the office’s authority. “Those who believe strongly in the state regulation and, I think, the good job that state regulators have done feel that without the protection of that provision that international law could easily trump anything that the states wanted to do,” said Rep. Spencer Bachus, R-Ala., the ranking Republican on Frank’s committee.
“The definition is clearly a sticking point,” Frank said toward the end of the long day of negotiation. He added that if this point can be worked out, the judicial review issues could become less pressing.
“We think we’ve got a number of ways we can clarify that,” said Sen. Chris Dodd, chairman of the Banking, Housing and Urban Affairs Committee and the chief Senate voice on the conference committee. He suggested the committee get staff and a working group of members to figure out a compromise, and Frank agreed to “set that one aside.”
Lawmakers also have a long list of remaining differences in other components of the financial reform bill, which Democratic leaders want signed into law by July 4.
“The Big I hopes that the conferees will adopt the House language on these two matters,” Symington said.
But in a letter to key lawmakers from a coalition of insurance groups that includes the American Insurance Association, American Council of Life Insurers, Reinsurance Association of America and the Council of Insurance Agents & Brokers, the groups wrote that the Senate version “more closely addresses the underlying purpose of the [office] on international insurance issues, which is to give the United States an authoritative voice in the global regulatory arena.”
(Jesse A. Hamilton, Washington bureau manager: Jesse.Hamilton@ambest.com)