NU Online News Service, July 25, 3:32 p.m.EDT

Congress must maintain keen oversight to ensure that federalregulators don't use their new, albeit limited, authority overinsurers to encroach on the proper role of state regulators, thepresident of an insurance trade group said at a House hearingyesterday.

Congress must exercise its authority and prevent the expansionof agencies created by the Dodd-Frank Act—such as the FederalInsurance Office and Office of Financial Research—so as reduceuncertainty of property and casualty insurers regarding whoregulates them, Charles M. Chamness, president and CEO of theNational Association of Mutual Insurance Companies said.

"As we move forward, we would urge Congress to rectify anyunintended consequences that are inevitable in any legislativeinitiative of this size and scope," Chamness said. "The focusshould remain on preventing unneeded and damaging interference in awell-functioning system."

Chamness made his comments in testimony before the HouseFinancial Services Subcommittee on Insurance, Housing and CommunityOpportunity.

At the same hearing, Rep. Bill R. Posey, R-Fla., testified thatit is important to keep insurance regulation primarily with stateauthorities.

One of his concerns is that the DFA could allow the FDIC toforce assessments on insurance companies for a new orderlyliquidation fund to cover losses on Wall Street.

As a result, Posey said he will propose legislation that wouldbar such assessments for insurers.

Robert Hartwig, president of the Insurance InformationInstitute, told the panel that 44 percent of U.S. P&C insurers'cumulative bond portfolios were invested last year in municipalsecurities issued by all 50 states and thousands of counties,cities and towns.

"In other words, the nation's auto, home and business insurersheld, as a group, municipal bonds that in 2011 served to finance$331 billion in governmental projects, such as building andimproving schools, roads, and bridges, as well as mass transit andhealthcare facilities." 

He also cited data indicating thatthe U.S. insurance industry employed 2.2 millionpeople in 2010, with 1.4 million of them working directly forinsurers and reinsurers, and the balance employed at insuranceagencies, brokers and other insurance-related enterprises.

Hartwig said that "Property and casualty and virtually all lifeinsurers, unlike banks, were able to operate normally throughoutthe entirety of the financial crisis and have continued to do sosince that time."

Consequently, he said, financial industry regulations adopted inthe wake of the crisis "must avoid imposing bank-centricregulations on the insurance industry, whose operating record andbusiness model are distinct from that of the banking sector."