The U.S. House of Representatives Committee on Financial Services held a hearing to discuss “Capital Markets Regulatory Reform: Strengthening Investor Protection, Enhancing Oversight of Private Pools of Capital, and Creating a National Insurance Office.” The hearing was focused on Rep. Paul Kanjorski’s, D-Pa., three legislative drafts from last week on investor protection, private fund adviser registration and a federal insurance office.
In his opening statement, Kanjorski said “excessive deregulation is dangerous” and proclaimed “we must ensure that special interests do not weaken particular solutions to the point of becoming toothless.” He said the objective to his three bills is to “swing the regulatory pendulum back toward the interests of hard-working Americans.”
Of particular interest to Automotive Service Association (ASA) members is Kanjorski’s third bill, H.R. 2609, on “Federal Insurance Office.” Of this, he says, “The third bill would create a Federal Insurance Office (FIO) to provide national policymakers with access to the information and resources needed to respond to crises, mitigate systemic risks and help ensure a well-functioning financial system. The credit meltdown highlighted the lack of expertise within the federal government regarding the insurance industry, especially during the collapse of American International Group and last year’s turmoil in the bond insurance markets. My bill would rectify these shortcomings and promote stability in our insurance markets.”
The third panel of the hearing focused on the creation of a Federal Insurance Office. Those who testified include:
• Janice M. Abraham, president and chief executive officer, United Educators Insurance, on behalf of the Property Casualty Insurers Association of America;
• David B. Atkinson, executive vice president and vice chairman, RGA Reinsurance Company, on behalf of the Reinsurance Association of America;
• Dennis S. Herchel, assistant vice president and counsel, Massachusetts Mutual Life Insurance Company, on behalf of the American Council of Life Insurers;
• Spencer M. Houldin, president, Ericson Insurance Advisors, on behalf of the Independent Insurance Agents and Brokers of America;
•Therese Vaughan, chief executive officer, National Association of Insurance Commissioners; and
• J. Stephen Zielezienski, senior vice president and general counsel, American Insurance Association.
Abraham, who testified on behalf of the Property Casualty Insurers Association of America, expressed concern that the FIO would have too much authority, and advised the Financial Services Committee to “take care to ensure the FIO’s mission and powers are limited to addressing gaps in federal and international policy making coordination.” She said, “The home, auto and business insurance industry is healthy and competitive and the current system of regulating the industry is working relatively well … We’re not broke, we didn’t cause the current financial crisis, and we don’t need a new federal oversight that may ultimately increase costs for consumers.”
Contrary to the PCI, The American Council of Life Insurers, represented by Herchel, advocates for the FIO and believes it would thrive if given more strength than Kanjorski’s H.R. 2609 allots. Herchel believes “it is imperative that the status and role of the FIO within the federal systemic risk regime be strengthened beyond what has been proposed. Doing so will ensure that insurance industry issues are given parity of consideration and importance by the systemic risk regulator …”
Herchel went on to praise the FIO, by listing the benefits to enacting it. He said the FIO would be “enormously beneficial to Congress as it considers issues that are vitally important to our business; would facilitate the handling of international insurance matters; and provide a means for effectively involving the insurance industry as national policy decisions are made affecting U.S. financial institutions.”
Houldin, on behalf of the Independent Insurance Agents and Brokers of America (IIABA), fought for state insurance regulation yet supports the FIO if it does not undermine the state insurance regulatory system. Of the FIO, he testified, “It is important to note that state insurance regulation has performed with distinction throughout the crisis and has greatly outshined its federal counterparts in other financial sectors … Although the IIABA strongly supports state insurance regulation and would oppose any effort to undermine that system, we recognize the benefits that can be achieved by establishing a non-regulatory body at the federal level that is able to review industry data, advise federal officials on critical insurance issues and coordinate efforts on international insurance matters.”
The IIABA, according to Houldin, believes that a national office that provides insurance industry data would “remedy many of the problems faced by insurance industry participants in the global economy.”
Vaughan, of the National Association of Insurance Commissioners, testified that the FIO would achieve Kanjorski’s two main objectives of “increasing insurance knowledge and expertise at the federal level and enhancing international competitiveness for U.S. insurance companies.” The National Association of Insurance Commissioners supports the FIO as long as it is established as a national insurance office to serve “as a resource for the federal government and a conduit for the states,” but opposes the FIO being used as a federal insurance regulator.
Testimonies from the hearing and Kanjorski’s discussion drafts are provided on ASA’s legislative Web site at www.TakingTheHill.com.
