NU Online News Service, June 10, 4:05 p.m.EDT

WASHINGTON–Congress Thursday afternoon launched itseffort to reconcile different versions of financial services reformlegislation, with the goal of putting a final bill on PresidentBarack Obama's desk before Independence Day.

Today's session was an organization session, with substantivetalks scheduled to begin next week.

The Senate version of H.R. 4173, which will be the base text for deliberations,imposes stronger restrictions on derivatives trading and gives aproposed Office of National Insurance stronger authority to preemptstate law in negotiating bilateral trade agreements with foreigncountries.

Insurance industry members voiced concerns about whether a finalbill should include language that would force insurance companiesto help pay for the liquidation of a failed financial institutiondeemed a systemic risk.

The Senate bill also contains the controversial "Volcker rule,"named after former Fed Chairman Paul Volcker, which would preventU.S. financial institutions from proprietary trading or investmentin and sponsorship of hedge funds and private-equity funds.

After the Senate voted for the legislation, USAA won Senatesupport for an amendment that instructs conferees to support achange in that provision that would exempt property and casualtyinsurers who only provide limited investment services to theircustomers through an insured financial institution.

State legislators have written a letter to conferees asking thatthe language in the Senate bill creating an Office of NationalInsurance with strong preemption authority be replaced with themuch weaker language contained in the House bill.

The state legislators, through the National Conference of StateLegislators (NCSL) and the National Conference of InsuranceLegislators (NCOIL), also asked that state banking, securities andinsurance regulators be added to the Financial Stability OversightCouncil that would be created through the legislation.

Such a provision is contained in the House bill.

The Independent Insurance Agents and Brokers of America (IIABA)also supported the NCSL and NCOIL provision.

In a letter to conferees, Robert Rusbuldt, IIABA president andCEO, said "the House language–which would create a FederalInsurance Office (FIO)–is a carefully crafted compromise and theproduct of several years' worth of deliberation andconsensus-building."

But nine other trade groups representing large insurancecompanies said in a letter to conferees that they support thecurrent Senate language on the preemptive authority of the ONI.

"Enabling the U.S. to engage in and conclude internationalagreements with foreign nations on prudential insurance measuresensures uniform and equitable treatment for foreign and domesticinsurers and reinsurers alike, fosters innovation and growth inU.S. markets, and promotes job creation," the letter said.

Both bills contain similar language reforming and modernizingthe surplus lines and reinsurance markets by establishing the rulesof a domiciliary state to govern regulation and tax assessment ofthese products. This language is likely to emerge intact from theconference.