NU Online News Service

WASHINGTON--Sen. Jeff Merkley, D-Ore., has introducedan amendment to financial services regulation now pending in theSenate that would drastically reduce the authority of the Office ofNational Insurance it would create.

Insurance groups reacted by voicing objections to Congress theyhad previously expressed. Eight trade organizations representinglarge domestic and international insurers sent a letter to allsenators today opposing the Merkley amendment.

The Merkley measure would limit the authority of the ONI inbilateral trade agreements to preempt only those state insurancelaws and rules which treat non-U.S. insurers less favorably thanU.S. insurers.

Under the provision currently in the bill, the ONI would behoused in the Treasury Department and would be given the authorityto negotiate international trade agreements as well as act as aninformation-gathering resource for federal regulators andlegislators.

Co-sponsors of the Merkley amendment include Sen. Sherrod Brown,D-Ohio; Sen. Barbara Boxer, D-Calif.; Russ Feingold, D-Wisc.; Sen.Olympia Snowe, R-Maine; and Sen. Bernard Sanders, I-Vermont.

It would tighten the standard the Treasury Department can use inpreempting state laws when negotiating international tradeagreements.

Cincinnati Companies, which supports the amendment, said theprovision would prohibit non-U.S. insurers and reinsurers whose ownbusiness decisions and business outcomes may result in unfavorableapplication of facially neutral state insurance laws, from evadingapplication of those laws to their U.S. operations.

The amendment would also require a consideration of the effectof preemption on consumer protections; on the safety and soundnessof U.S. insurance markets; and whether the preemption action wouldcreate gags and voids in financial or market conduct regulation bythe states.

It would also allow the states to appeal the preemption decisionto the federal courts.

Moreover, any preemption action would be subject to a notice andcomment period under the federal Administrative Procedures Act.

The amendment would also revise the current language in theRestoring Financial Stability Act of 2010, (S. 3217) bytransferring authority to conduct a study of how current insurancelaws could be updated from the Treasury Department to theGovernment Accountability Office.

It also revises the mandate of the study that would be conductedto effectively concentrate on how federal preemption authorityshould be used to improve existing state insurance regulation.

According to a letter sent to members of the Senate by anofficial of the Cincinnati Companies, the amendment has the supportof the National Association of Mutual Insurance Companies and theProperty Casualty Insurers Association of America.

The National Conference of State Legislators also wrote a letterto every member of the Senate today voicing support for the newamendment.

The NCOIL letter lauded the amendment by Sen. Merkley, sayingthat, By confining ONI scope to 'covered agreements' rather than'international insurance agreements" on prudential measures' andproviding criteria for action, NCOIL believes you have narrowed thebroadly drawn authority of the current Senate proposal and weakenedthe opportunity for feared 'mission creep'."

In doing this, the NCOIL letter added, "you have made what NCOILhas always considered an onerous proposal less onerous."

The eight trade groups opposing the amendment said in theirletter that the Merkley amendment "would substantially weaken theOffice of National Insurance's power to address internationalissues that are critical to U.S. companies, and ultimately to U.S.consumers."

Those signing the letter include the American InsuranceAssociation; the Financial Services Roundtable; the Council ofInsurance Agents & Brokers; the Association of Bermuda Insurers& Reinsurers; the European Insurance and ReinsuranceFederation; the American Bankers Insurance Association; the Riskand Insurance Management Society, Inc.; the American Council ofLife Insurers; and the Reinsurance Association of America