WASHINGTON–The House Financial Services Committee will take a closer look at a number of insurance regulatory issues over the next several weeks, beginning with a hearing on municipal bond issues set for Wednesday, a committee staff member said.

Speaking at the Legislative/Regulatory Conference of the Self Insured Institute of America in Washington today, Kathleen Mellody, counsel to the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, said that bond insurance is “a new topic for many of us here in Washington,” but added that the “ricochet effect” of troubled bond insurers on the economy in general is a concern for lawmakers.

The insurers, whose most risk-free business is municipal bonds, have been in difficulties because of their involvement with derivative investments from the subprime mortgage lending market.

Ms. Mellody said the committee will take up two other issues in addition to bond insurance. She mentioned changes to the legislation enabling risk retention groups (RRGS) and a continued discussion of insurance regulation, with hearings in mid-April.

Rep. Dennis Moore, D-Kan., told the SIIA on Wednesday that he was working to craft legislation adjusting the Risk Retention Act. The law, which was enacted in 1986, currently limits RRGs to providing liability coverage as corporations or limited liability associations that function as captive insurance companies for member owners that are licensed as insurance companies or chartered as captives.

Rep. Moore's legislation would allow RRGs to offer other property coverage, and Ms. Mellody said the committee would wait for Rep. Moore to finish crafting the bill and that hearings are currently being scheduled for mid-April.

At roughly the same time, Ms. Mellody said the committee will begin taking a deeper look at the insurance regulatory system and the “number of proposals” that have been proposed to fix it, including an optional federal charter proposed by some industry groups and proposals from the National Association of Insurance Commissioners.

The Capital Markets Subcommittee, which is chaired by Rep. Paul Kanjorski, D-Penn., began looking into insurance reforms last fall. Ms. Mellody noted that the fall hearings were intended to examine the issues of regulation, rather than the possible fixes.

“Now we're going to turn this year to the possible solutions,” she added. The hearings will initially include all of the regulatory reform proposals, but she said it was expected that further hearings would narrow the field to those that committee members take interest in.

Extending the National Flood Insurance Program is also a top priority, Ms. Mellody said, although for the moment there is nothing the committee can do on the issue. The House passed its version of NFIP legislation last year, but the bill has not been voted on by the Senate. Once that occurs, she said House and Senate members will meet to work out the differences in the two bills.

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