Introduction of legislation establishing an optional federal charter for insurance companies–both life and property-casualty–is imminent, according to several industry sources.
A bill could be introduced as early as late this week, or perhaps as late as when Congress returns from its spring recess April 24, according to a number of insurance industry lobbyists.
The bill is being introduced by Sens. John Sununu, R-N.H., and Tim Johnson, D-S.D. No additional co-sponsors have agreed to join them, the lobbyists said. Staff officials in Sen. Sununu's office declined repeated requests for comment on their plans late last week.
The bill is in final draft form and is being circulated to stakeholders–insurance industry trade group officials and lawyers–for their reaction, several lobbyists said.
The Senate bill will call for creation of an optional federal charter for both life and p-c insurers, said Jamie Burnett, Sen. Sununu's legislative director, who discussed the plans at an Industry Summit here in Washington on March 1. Mr. Burnett said the bill will call for creation of an independent federal regulator within the Treasury Department, similar to that of the Office of the Comptroller of the Currency.
Gary Hughes, executive vice president and general counsel for the American Council of Life Insurers, said later during the Summit that one advantage of the Senate bill is that the regulatory system proposed in it will have no impact on the federal budget.
Mr. Hughes said the industry has agreed to pay the cost of federal regulation through fees–the same system used by national banks–and even to pay the cost of establishing the system within Treasury.
Under the plan, Mr. Burnett said, the state guaranty fund system would remain in place, presumably with the states serving as liquidators for an insolvent, federally chartered insurance institution domiciled in their jurisdiction.
It is unclear when any legislation calling for reform of the insurance regulatory system will surface in the House. Legislation calling for creation of so-called federal “standards” or “tools” designed to bring uniformity to state regulation has been in the draft stage for several years. Such legislation is dubbed the State Modernization and Regulatory Transparency Act–better known as SMART.
The House bill–if it ever surfaces–will include language calling for an end to rate regulation for p-c insurers, Glenn Westrick, majority counsel on the House Financial Services Committee, said at the Summit. Primary sponsors of this bill are Reps. Mike Oxley, R-Ohio, who chairs the committee, and Richard Baker, R-La., who chairs the Capital Markets Subcommittee.
The language calling for rate deregulation is not being supported by Democrats on the committee. It is unclear how the Senate bill will address this issue.
In comments at the Summit, Alessandro Iuppa, Maine superintendent of insurance and president of the National Association of Insurance Commissioners, said reform was needed, but that federal involvement would create more problems than it would solve.
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