NU Online News Service, Nov. 15, 1:10 p.m. EST

It is unnecessary for property and casualty insurance companies to be overseen by the Financial Stability Oversight Council as potentially "systemically significant," and Congress should move to take away that authority, a P&C trade group contends.

In a letter to Congress, officials of the National Association of Mutual Insurance Companies (NAMIC) say passage of three bills sought by state regulators that would severely roll back federal authority to oversee insurance companies should only be the start of legislative action to curb federal oversight of insurance companies.

The letter was written to Rep. Judy Biggert, R-Ill., and Rep. Luis Gutierrez, D-Ill. Biggert is chair and Gutierrez is ranking minority member of the House Subcommittee on Insurance, Housing and Community Opportunity.

Charles Chamness, NAMIC president and CEO, signed the letter and sent in advance of Wednesday's hearing by the subcommittee on "Insurance Oversight and Legislative Proposals."

Chamness says Congress should strike the FSOC's authority to designate insurance companies as systemically important financial institutions (SiFi) because:

Evidence shows that the insurance industry is highly competitive and well capitalized.

Owing to the nature of its products, the insurance industry is unique within the financial-services sector in that it poses no risk to the financial system.

Recent history demonstrates the effectiveness of the state-based system of insurance regulation for protecting the solvency of insurers.

The legislative history of Dodd-Frank makes clear that lawmakers did not believe that insurers generally pose a systemic risk.

Regarding the three bills supported by state regulators:

One would revoke the authority of the Federal Insurance Office and the Office of Financial Research within the Treasury to subpoena information from insurance companies.

The second would "explicitly and entirely" exclude insurance companies, including mutual insurance holding companies, from the Federal Deposit Insurance Corporation's "orderly liquidation authority" for troubled large non-banks.

The third would "preclude" the Federal Reserve from establishing higher prudential financial standards to troubled insurance companies it would oversee as ordered by the FSOC.

Chamness says these three legislative proposals under discussion "represent an excellent first step toward bringing much-needed certainty to insurance markets."

However, he adds, "We also believe that more can and should be done to limit any unintended consequences for insurers from the effects of the Dodd-Frank Act—one example being the prevention of new and unnecessary regulation of insurers by the FSOC."

Tom Litjen, vice president of federal government relations for the Property Casualty Insurers Association of America (PCI), says abut the three bills, "We do not believe that these proposals in any way threaten the powers that Dodd-Frank granted to federal regulatory agencies. The discussion drafts propose technical amendments that clarify Dodd-Frank's application to insurers and reduce the potential for unintended intrusions on state regulatory authority that could result in duplicative and significant administrative expenses on the business sector. We anticipate that the proposals will enjoy bipartisan support, and we look forward to working with the Subcommittee to move these proposals forward."