NU Online News Service

WASHINGTON--Legislation creating a Federal InsuranceOffice within the Treasury Department was passed today by the HouseFinancial Services Committee.

Congressional staff said they believe the House could begindebate on the bill as well as others dealing with financialservices reform as early as next Wednesday.

Passed by voice vote, the measure is called the FederalInsurance Office Act, H.R. 2609. It contains specific languageremoving it from having any supervisory or regulatory authorityover the business of insurance and bars the FIO from preemptingstate insurance laws governing rates, premiums, coveragerequirements, antitrust laws, underwriting or sales practices.

The measure was altered considerably from that proposed by theObama administration and later by the committee's Democraticleadership in order to win the support of state insuranceregulators, insurance agents and small insurers.

Specifically, as passed by the committee, in addition to havingno authority to regulate insurers, the FIO's ability to negotiateinternational agreements was also diminished.

The bill now requires the proposed FIO to share the authority tonegotiate international agreements with the Office of the U.S.Trade Representative.

Moreover, any agreements reached would only be effective after a"layover" period during which time Congress would have theauthority to take action.

The measure's language also provides for review in federal courtfor challenges brought against federal preemption of stateinsurance regulations.

The bill creates an office within the Treasury Departmentdesigned to coordinate dealing with international matters, provideinformation to the systemic risk regulator about potentially riskyinsurers, and collect data on insurance solvency.

David Sampson, president and chief executive officer of theProperty Casualty Insurers Association of America (PCI), noted thechanges made to win unanimous approval.

"We believe it is crucial that this legislation incorporateschanges from both parties, because financial services regulatoryreform will best benefit consumers if Democrats and Republicanswork together to advance long-term solutions," Sampson said.

The revised bill was also lauded as acceptable by officials ofthe National Association of Mutual Insurance Companies and theIndependent Insurance Agents and Brokers of America.

Jimi Grande, NAMIC senior vice president of federal andpolitical affairs, said, "This legislation has come a long waysince the summer, when we had a number of major concerns with thebroad powers granted to the office."

He added, "In addressing those concerns, the legislation hasmoved back toward its original purpose of providing insuranceexpertise and information to federal policymakers."

And Charles Symington, senior vice president of governmentrelations for the IIABA, said, "While the IIABA believes that thestate regulatory system should be preserved and reformed, it hasbecome clear that the state system needs assistance to effectivelyaddress the inefficiencies that exist today in the regulation ofinsurance."

But, officials of the American Insurance Association said thatwhile the legislation "is a good first step," the AIA "believesthat the federal government still needs to have the ability tocreate and empower an office that will understand how the insuranceindustry works, how it handles risk, utilizes capital and meets theneeds of its customers."

The new language on international agreements is a major concernto Leigh Ann Pusey, AIA president and CEO.

"A necessary element of this legislation is the authority tonegotiate international agreements on prudential insurancematters," Pusey said.

"While we remain supportive of the creation of this office, westill have concerns that the language contained in the currentversion of this legislation will not provide the office with theadequate authority it needs," she said. "Without such authority, itcould limit the federal government's ability to advocate ourindustry's interest at the international level," she added.

The bill passed by the committee also states that an "insurer"under a mandatory data collection provision does not includeinsurance agents and agencies.

"Without this amendment, the newly created FIO would haveinadvertently had the ability to require countless agents, brokersand adjusters to produce any data and information that the FIOmight demand," said Robert Rusbuldt, IIABA president & CEO.

Another amendment adopted by the committee would require the newagency to study and report to Congress in one year on how tomodernize and improve the system of insurance regulation in theU.S.

The study would measure progress against six Obamaadministration principles for insurance regulatory reform.

At the same time, Rep. Barney Frank, D-Mass., chairman of thecommittee, said during debate on the measure that proposedlegislation creating an optional federal charter for insuranceremains on the table, and the committee will hold hearings on billscreating such a charter in the spring.