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The Dodd-Frank bill is now the Dodd-Frank Act, after President Barack Obama signed the 2,300-page financial reform package into law.
Nearly two years after the events that began the dramatic failures and near-failures of the U.S. financial crisis, Congress and the White House have now set down their attempt to prevent another such crisis. And in his speech, Obama was quick to again raise the specter of American International Group Inc.’s financial products division. “Firms like AIG placed massive risky bets with borrowed money,” he said, adding that this act will “put a stop to taxpayer bailouts, once and for all.”
In those same two years, the wider insurance industry has struggled steadily to get out from under the shadow of AIG’s infamous investment arm. And in the debate over financial reform, insurers were generally successful in making sure their industry was not lumped in with other types of financial firms under these new regulators.
The American Insurance Association — echoing other industry groups — said it will now focus on the act’s implementation, making sure it is consistent with the intent of Congress, said AIA President and Chief Executive Officer Leigh Ann Pusey. She said one of the important next steps is making recommendations to the White House on who should lead the act’s Federal Insurance Office. “We’ll all be looking for suggestions to the administration on that,” she said.
“We hope the new FIO will provide policymakers with expert advice on the full spectrum of industry, much as federal banking and securities regulators do for their industries,” said Frank Keating, president and CEO of the American Council of Life Insurers, in a statement. “We look forward to initiating a dialogue with the FIO as soon as it is up and running.”
The only significant regulatory item directly targeted at insurers was the adoption of reforms long advocated by surplus lines groups. The new law puts taxation, regulatory and licensing authority exclusively into the home state of the insured, meaning that multistate policies would only have premiums taxed in a single state (BestWire, June 14, 2010). Charles Symington, senior vice president of government affairs for the Independent Insurance Agents & Brokers of America, called it “a perfect example of the appropriate way to modernize insurance regulation: targeted federal legislation to improve the state system without creating a federal regulator.”
The act also rejects the U.S. Securities and Exchange Commission’s ability to step in and regulate equity-indexed annuities, a development welcomed by companies who issue those products (BestWire, July 20, 2010).
Obama suggested this isn’t a finished process and that regulators will need to closely monitor how things are working. ‘We may need to make adjustments along the way,” the president said.
(Jesse A. Hamilton, Washington bureau manager: Jesse.Hamilton@ambest.com)