Washington

Insurance products would be mostly exempt from oversight by theproposed U.S. Consumer Financial Protection Agency underlegislation submitted to Congress last week by the TreasuryDepartment.

Under the proposed measure, "the business of insurance" would beexempt from oversight by the new agency except for credit, mortgageand title insurance.

Cliston Brown, director of federal public affairs at theProperty Casualty Insurers Association of America, said his groupwas "pleased" by the specifics of the new bill.

"The property and casualty industry offers the strongestconsumer protections of all financial services sectors and does notneed additional consumer products regulation," he said.

Specifically, under the legislation, personal lines products,life insurance, annuities, disability income insurance andlong-term care insurance would be exempt from oversight.

However, officials at the Association for Advanced LifeUnderwriting cited one "question/concern" about the proposedlegislation–specifically, the implications for agents of including"financial advisors" under the new agency's purview.

The proposed bill would split off consumer protection offinancial products from existing federal agencies. The newfive-member agency would "promote transparency, simplicity,fairness, accountability and access in the market for consumerfinancial products and services."

According to recent testimony, the new agency will primarilyrely on state consumer protection agencies and attorneys general tocarry out its enforcement activities.

SURPLUS LINES

In other Washington developments, legislation streamlining andreforming state regulation of surplus lines insurance andreinsurance was introduced in the Senate, creating a uniformregulatory system while preserving the role of the stateregulator.

The bill has broad, bipartisan support from both the industryand members of Congress. Companion legislation is likely to passthe House under expedited procedures within the next month.

The legislation–S. 1363–was co-sponsored by Florida SenatorsBill Nelson (a Democrat) and Mel Martinez (a Republican), as wellas Sen. Evan Bayh, D-Ind., and Sen. Mike Crapo, R-Idaho.

From the buyers' perspective, the Risk and Insurance ManagementSociety voiced strong support for the measure to the U.S. Senate."RIMS believes the Non-Admitted and Reinsurance Reform Act of 2009would make insurance more available and affordable by reducinginsurers' regulatory costs that are passed on to consumers," saidDeborah M. Luthi, a member of the RIMS board and director ofenterprise risk management services at Matheson.

"RIMS is pleased the Senate version now incorporates theRIMS-approved definition of a 'qualified risk manager'" indetermining eligibility under the new regulatory regime. "RIMSurges the Senate to pass this legislation as soon as possible," sheadded.

Joel Wood, senior vice president for legislative affairs at theCouncil of Insurance Agents and Brokers, said that "having the billin the hopper in the Senate gets us back to the position we were inlast year–before the financial meltdown sucked all the oxygen outof the Senate Banking Committee–and we're obviously extremelygrateful for the support of these four members of the Senate, allrespected members of the Banking Committee."

John Wood, president of the National Association of ProfessionalSurplus Lines Offices, said the bill would "help consumers bymaking property and liability insurance more readily available andimproving the efficiency of the surplus lines insurancemarket."

Kurt Bingeman, co-chair of the governmental affairs committee atthe American Association of Managing General Agents, added that "asbusiness and personal interests in the U.S. have expanded beyondsingle-state lines, insurance producers and their clients requireclear and non-conflicting guidance in order to transact quickly andwith assurances they have complied with the appropriate rules andcan efficiently meet their tax liabilities." He called the bill a"critical step" in meeting this goal.

NAPSLO Executive Director Richard Bouhan said enactment of thebill would simplify the tax remittance and complianceresponsibilities surplus lines brokers must discharge, and also"bring efficiency and cost reduction of regulatory compliance inplacements with multistate exposures."

The reforms contained in the legislation "would benefit not onlythe brokers and underwriters who provide surplus lines insurance,but also consumers who ultimately pay the price for theinefficiencies," Mr. Bouhan said.

HOUSE ACTION

A bill modernizing and reforming regulation of surplus lines andreinsurance, as well as another streamlining nonresident insuranceagent and broker licensing, could be acted on by the full Housethis month, according to industry officials.

The bills–the Non-Admitted and Reinsurance Reform Act of 2009(H.R. 2571) and the National Association of Registered Agents andBrokers Reform Act (H.R. 2554)–were introduced in May. Both couldbe dealt with under expedited procedures on the House floor asearly as the week of July 6, when Congress returns to work from itsbrief Independence Day recess, according to some industrylobbyists.

But others are more cautious, saying action is more likely totake place sometime later in July.

According to Washington officials of insurance groups withinterest in the bills, the two ranking members of the HouseFinancial Services Committee–Rep. Barney Frank, D-Mass., thecommittee chair, and Rep. Paul Kanjorski, D-Pa., chair of thepanel's key Capital Markets Subcommittee–have agreed to allow thebills to proceed to the floor without the need for committeeaction.

The reason the bills are being allowed to bypass committee isthat they are the same as bills passed by the full House lastSeptember, and because they have broad, bipartisan support, thelobbyists said.

CIAB's Mr. Wood cautioned that nothing is a given on CapitolHill, but added, "It's just that we feel good that House [FinancialServices Committee] leaders have been supportive once again ofmoving the surplus lines legislation."

"Were it not for the financial meltdown, we were in a prettygood position to see the bill through to enactment last year, butunderstandably we couldn't get the requisite oxygen in thatenvironment," he said.

The NARAB measure would create a national mechanism tostreamline nonresident insurance agent and broker licensing. Thereis no companion legislation in the Senate for the NARAB bill.

The measure preserves state insurance regulation and consumerprotection provisions, but would require agents applying formembership to submit to a criminal background check. Currently only17 states require federal criminal background checks forproducers.

The NARAB II legislation–introduced by Rep. David Scott, D-Ga.,and Rep. Randy Neugebauer, R-Texas–would be "a strong step forwardin dealing with the problem of overlapping nonresident agentlicensing requirements," according to Charles Symington, seniorvice president of government affairs for the Independent InsuranceAgents and Brokers of America.