The letter also said that the proposed Merkley amendment subjects a preemption decision by the director of the ONI to a judicial review, "ensuring that the [ONI] director's determination of inconsistency between the agreement and state law receives no deference at all."

The amendment would replace the current language in the Senate bill dealing with ONI preemption authority Title V of S. 3217, the "Restoring Financial Stability Act of 2010."

"Enabling the United States to engage in and conclude international regulatory agreements with foreign nations on prudential insurance measures that ensure uniform and equitable treatment for foreign and domestic insurers and reinsurers alike fosters the growth of the United States markets, as well as job creation," the letter said.

Sen. Merkley's amendment acknowledges the importance of international insurance prudential matters and negotiations, "including on standard-setting," according to the letter, but at the same time it "strips the ONI's ability to address those issues in a meaningful way in the United States by making the limited preemption process effectively unattainable."

The result, according to the letter, "is that no regulatory entity would be empowered to deal with important insurance international regulatory issues."

This, the letter added, "not only further undermines the credibility of the current state regulatory system, but it is not in the consumers' interest."

The current Senate Banking Committee language, the letter said, "provides appropriate due process, while still allowing for limited preemption to effectuate these important international insurance agreements."

The letter was signed by officials of the American Insurance Association, American Bankers Insurance Association, American Council of Life Insurers, Financial Services Roundtable, Council of Insurance Agents and Brokers, Association of Bermuda Insurers and Reinsurers, and the Reinsurance Association of America.

It was also signed by the Risk and Insurance Management Society–the leading representative of U.S. commercial insurance buyers.

Under the language presently in the bill, the Treasury secretary, in consultation with the U.S. Trade Representative, would have the power to preempt state laws found to be "inconsistent with international insurance agreements on prudential matters."

The Merkley amendment would replace that provision with narrower language that "would make preemption very difficult if not impossible to achieve," according to Tracey Laws, senior vice president and general counsel at RAA.

Blain Rethmeier, AIA's senior vice president for public affairs, said his group "could never support the Merkley amendment because it would substantially weaken the ONI's power to address international issues which are critical to U.S. companies and consumers."

The amendment is being introduced at the request of the National Association of Insurance Commissioners, which opposes the bill's language as drafted by Sen. Chris Dodd, D-Conn. The NAIC, in an April 29 letter to Sen. Merkley, said it supported his amendment. NAIC wanted the provision scaled backed to ensure that "international agreements are subject to appropriate review and input, and to protect against unnecessary preemption of state law."

Top NAIC officials said in their letter to Sen. Merkley that the issue is "critical to state insurance regulators, as the Department of Treasury under the bill would, for the first time, have the power to make determinations on the preemption of state insurance measures."

Julie Edwards, Sen. Merkley's communications director, said the amendment will clarify the language creating the ONI "to protect against unnecessary preemption of state regulation."

"Given the strides states have taken in protecting their residents, it was important to Sen. Merkley that those protections are left in place and there is more room for consultation with Congress when international agreements are being negotiated rather than a one-size-fits-all approach," Ms. Edwards said.

She added that "state laws protecting their citizens shouldn't be voided in order to give special treatment to foreign companies, and this amendment will make sure they won't be."