NU Online News Service, July 25, 3:32 p.m. EDT
Congress must maintain keen oversight to ensure that federal regulators don’t use their new, albeit limited, authority over insurers to encroach on the proper role of state regulators, the president of an insurance trade group said at a House hearing yesterday.
Congress must exercise its authority and prevent the expansion of agencies created by the Dodd-Frank Act—such as the Federal Insurance Office and Office of Financial Research—so as reduce uncertainty of property and casualty insurers regarding who regulates them, Charles M. Chamness, president and CEO of the National Association of Mutual Insurance Companies said.
“As we move forward, we would urge Congress to rectify any unintended consequences that are inevitable in any legislative initiative of this size and scope,” Chamness said. “The focus should remain on preventing unneeded and damaging interference in a well-functioning system.”
Chamness made his comments in testimony before the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity.
At the same hearing, Rep. Bill R. Posey, R-Fla., testified that it is important to keep insurance regulation primarily with state authorities.
One of his concerns is that the DFA could allow the FDIC to force assessments on insurance companies for a new orderly liquidation fund to cover losses on Wall Street.
As a result, Posey said he will propose legislation that would bar such assessments for insurers.
Robert Hartwig, president of the Insurance Information Institute, told the panel that 44 percent of U.S. P&C insurers’ cumulative bond portfolios were invested last year in municipal securities issued by all 50 states and thousands of counties, cities and towns.
“In other words, the nation’s auto, home and business insurers held, as a group, municipal bonds that in 2011 served to finance $331 billion in governmental projects, such as building and improving schools, roads, and bridges, as well as mass transit and healthcare facilities.”
He also cited data indicating that the U.S. insurance industry employed 2.2 million people in 2010, with 1.4 million of them working directly for insurers and reinsurers, and the balance employed at insurance agencies, brokers and other insurance-related enterprises.
Hartwig said that “Property and casualty and virtually all life insurers, unlike banks, were able to operate normally throughout the entirety of the financial crisis and have continued to do so since that time.”
Consequently, he said, financial industry regulations adopted in the wake of the crisis “must avoid imposing bank-centric regulations on the insurance industry, whose operating record and business model are distinct from that of the banking sector.”