NU Online News Service, May 6, 10:37 a.m.EST

WASHINGTON–Eight insurance industry trade groups havewritten the Senate urging it to reject an amendment they said would"substantially weaken" the proposed Office of National Insurance'sauthority to address international trade issues.

The amendment, crafted by Sen. Jeff Merkley, D-Ore., wouldnarrow the authority of the Treasury Department, where the ONIwould be located, to negotiate international insurance tradeagreements without the approval of state insurance regulators.

While many insurance organizations are opposing the amendment,the National Association of Mutual Insurance Companies has said itsupports the language crafted by Sen. Merkley.

The letter from the eight trade groups in opposition, said theproposed amendment requires the ONI to "navigate a procedurallabyrinth" before entering into the applicable internationalagreement. These include extensive notifications/consultations withthe United States Trade Representative, two congressionalcommittees and the insurance commissioners on what is "essentiallya regulatory, not a trade, issue."

It then subjects that decision to a post-hoc AdministrativeProcedures Act notice and comment process, the letter noted.

The letter said the proposed Merkley amendment would alsorequire that if the ONI director determined that a proposed tradeagreement would be inconsistent with state law that his decisionwould be subject to a judicial review- ensuring that his finding"receives no deference at all."

The Merkley amendment would replace the current language in theSenate bill dealing with preemption authority of the ONI ascontained in Title V of the Restoring Financial Stability Act of2010 (S. 3217).

The bill is now being debated on the Senate floor.

In arguing against the Merkley amendment, the trade groups saidthat enabling the United States to engage in and concludeinternational regulatory agreements with foreign nations onsolvency issues and ensuring "uniform and equitable treatment forforeign and domestic insurers and reinsurers alike fosters thegrowth of the United States markets, as well as job creation."

Their letter to Senators said that Sen. Merkley's amendmentacknowledges the importance of international insurance agreementson solvency issues and negotiations, "including onstandard-setting."

At the same time, however, the proposed amendment "strips theONI's ability to address those issues in a meaningful way in theUnited States by making the limited preemption process effectivelyunattainable," the groups wrote.

The result, their letter said, "is that no regulatory entitywould be empowered to deal with important insurance internationalregulatory issues."

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

The current language in the Senate Banking Committee bill"provides appropriate due process while still allowing for limitedpreemption to effectuate these important international insuranceagreements," according to the trade groups.

They called the bill "critical to U.S. companies and ultimatelyto U.S. consumers."

The letter was signed by officials of the American InsuranceAssociation; the Financial Services Roundtable; the Council ofInsurance Agents & Brokers; the Association of Bermuda Insurers& Reinsurers; the American Bankers Insurance Association; theRisk and Insurance Management Society, Inc.; the American Councilof Life Insurers; and the Reinsurance Association of America.

In support of the amendment NAMIC said it believes "that anyfederal legislation must recognize the strength and primacy of thestate-based regulatory system for insurance and that anypre-emption of state authority should be narrowly limited in scope,and for that reason we support Sen. Merkley's carefully writtenamendment. The amendment would ensure that pre-emption occurs onlywhen absolutely necessary, while still allowing domestic insurersto remain competitive on a global scale."