Legislative changes that would diminish the powers of a proposed Federal Insurance Office have resulted in the breakdown of what once seemed to be a consensus between regulators and insurance companies over the creation of the new federal bureau.
The recent disagreement stems from a series of managers’ amendments (Republican-Democratic consensus proposals) circulated to U.S. House of Representatives’ Capital Markets, Insurance, and Government-Sponsored Enterprises staff during mid-November. The amendments would strip the proposed Federal Insurance Office of nearly all of its power to oversee international trade agreements involving insurance, and it would override state laws that violate them.
As recently as October, the state regulators at the National Association of Insurance Commissioners (NAIC), major insurance trade groups, and most insurers expressed support for legislation offered by Rep. Paul Kanjorski (D-PA). The National Council of Insurance Legislators had opposed the legislation in any form.
Move to Boost Competitiveness
Insurance industry groups argue the new office would improve America’s global competitiveness, a view the NAIC once seemed to share.
“Currently, the federal government lacks any entity with an expertise on insurance-related issues or a voice that will allow the United States to engage authoritatively with the global community on international insurance matters,” said Blain Rethmeier, a senior vice president for the American Insurance Association. “The Federal Insurance Office can serve that role, but only if it’s structured correctly and given the requisite authority it needs.”
State regulators, however, wanted to preserve their powers rather than transfer them to the federal government. Currently, the NAIC—a private association of state insurance regulators—represents U.S. insurance interests in international trade negotiations.
International Competitiveness Concerns
Without a national enforcement mechanism or core group of insurance experts in the federal government, insurance industry and consumer groups have found enforcing international obligations has tended to require legal battles and special legislation In addition, NAIC’s elected presidents—chief state insurance regulators who serve one-year terms—rarely had backgrounds in international trade negotiations.
The office would do little good without power to oversee international trade, insurance industry groups argue,
A letter to subcommittee chair Paul Kanjorski (D-PA) from the American Insurance Association, the American Council of Life Insurers, and the Reinsurance Association of America expresses trade groups’ fears new amendments may prevent “the FIO from having any real ability to back up international commitments made by the U.S. with our foreign trading partners in critical areas” such as international solvency and accounting standards that apply to insurance.
Eli Lehrer ([email protected]) is director of The Heartland Institute’s Center on Risk, Regulation, and Markets.