NU Online News Service, May 5, 10:17 a.m. EDT

WASHINGTON–An Oregon senator is proposing an amendment to financial services legislation significantly limiting the Treasury Department's authority to negotiate international insurance trade agreements.

It would replace the current language in the Senate bill dealing with the preemption authority of the proposed Office of National Insurance within the Treasury Department.

The measure is being proposed by Sen. Jeff Merkley, D-Ore. for Title V of the Restoring Financial Stability Act of 2010 (S. 3217).

Under the language presently in the bill, the Treasury secretary, in consultation with the U.S. Trade Representative, would have the power to preempt state laws found to be "inconsistent with international insurance agreements on prudential matters."

The Merkley amendment would replace that provision with narrower language that "would make preemption very difficult if not impossible to achieve," according to Tracey Laws, senior vice president and general counsel of the Reinsurance Association of America.

Jack Dolan, a spokesman for the American Council of Life Insurance, added, "We prefer the current approach in the Senate bill on the preemption language but believe it could be improved with simple language making it clear that preemption cannot occur if it would result in a financial regulatory oversight gap or create an unlevel playing field for U.S. insurers."

Blain Rethmeier, American Insurance Association senior vice president public affairs, said, "AIA could never support the Merkley amendment because it would substantially weaken the ONI's power to address international issues which are critical to U.S. companies and consumers."

But Jimi Grande, National Association of Mutual Insurance Companies senior vice president of federal and political affairs, said his organization backs Sen. Merkley's proposed language change.

"NAMIC believes that any federal legislation must recognize the strength and primacy of the state-based regulatory system for insurance and that any pre-emption of state authority should be narrowly limited in scope, and for that reason we support Sen. Merkley's carefully written amendment. The amendment would ensure that pre-emption occurs only when absolutely necessary, while still allowing domestic insurers to remain competitive on a global scale," he said in a statement.

Debate on the legislation is currently underway on the Senate floor. It is unclear when the amendment proposed by Sen. Merkley will be taken up.

The amendment is being introduced at the request of the National Association of Insurance Commissioners, which opposes the bill's language as drafted by Sen. Chris Dodd, D-Conn.

The NAIC in an April 29 letter to Sen. Merkley said it supported his amendment.

The NAIC wanted the provision scaled backed to ensure that "international agreements are subject to appropriate review and input, and to protect against unnecessary preemption of state law."

Top NAIC officials said in the letter to Sen. Merkley that the issue is "critical to state insurance regulators, as the Department of Treasury under the bill would, for the first time, have the power to make determinations on the preemption of state insurance measures."

Julie Edwards, Sen. Merkley's communications director, said the amendment will clarify the language creating the Office of National Insurance "to protect against unnecessary preemption of state regulation."

Ms. Edwards said, "Given the strides states have taken in protecting their residents, it was important to Sen. Merkley that those protections are left in place and there is more room for consultation with Congress when international agreements are being negotiated rather than a one-size-fits-all approach."

Ms. Edwards explained that "state laws protecting their citizens shouldn't be voided in order to give special treatment to foreign companies, and this amendment will make sure they won't be."

The RAA's Ms. Laws said the NAIC requested the language it had negotiated with the House Democratic leadership for the Senate bill, but Sen. Merkley took a different approach.

His amendment, she said, utilizes as a basis the language in the current Senate bill but made "modifications to the language so that it has the same end result as the House language."

Ms. Laws explained it could make preemption of state authority something very difficult by imposing a number of procedural layers to achieving preemption, and "it requires that any 'covered agreement' meets the regulatory goals of the states with respect to the comparable subject matter."

In general, under the bill as crafted by Sen. Dodd, the ONI would have the authority to collect and analyze insurance data and prepare a study for Congress recommending to Congress the best ways to modernize the insurance system.

The ONI under the bill as drafted by Sen. Dodd would also have the power to recommend which insurers should be supervised by the Federal Reserve.

It would be given the authority to "perform such other related duties and authorities as may be assigned to the Office by the Secretary."

Special Reports /

A Move To Limit Any Treasury Insurance Trade Pact Power

Related Stories

Recommended For You