Federal Chartering On Hold?
New Orleans
Its a close call, but the way Jack Ramirez reads the tea leaves, efforts to move federal chartering proposals through Congress anytime soon will be a surprise victim of the Sept. 11 terrorist attacks.
It could almost as easily go the other way, but the chances for delay, in the short term, have "a slight edge," he told me during the annual meeting here last week of the Des Plaines, Ill.-based National Association of Independent Insurers, of which he is president.
At issue is whether, and which way, the competing forces generated by the debate over federal terrorism reinsurance will sway the debate over federal chartering in the Congress. Heres the Ramirez take on that big question:
On the one hand, the terrorism debate could make federal intervention more likely, for a variety of reasons.
First of all, the terrorism debate again raises the Congressional profile of the insurance industry, putting insurers on center stage in Washington for the first time since the long process leading up to enactment of the Gramm-Leach-Bliley Financial Services Modernization Act. In the current debate, insurance regulation is on the radar screens of two key Congressional committees, one in the Senate and one in the House. "With terrorism reinsurance likely to be an issue for another year or two, it will be difficult to fly under the radar," says Mr. Ramirez.
It will be difficult for state regulators to fly under as well, as they will have to prove themselves anew to Congress.
In addition, the World Trade Center calamity dramatized to Congress how critical insurance is to the economy–a now-troubled economy at that–so it just might try to extend its regulatory reach.
Then, too, a new federal reinsurance program for terrorism implicitly sets a new precedent for federal involvement in insurance affairs. Each preemption of state regulation, so the argument goes, makes the next one easier.
On the other hand, the positive response of the industry and its regulators to the Sept. 11 disaster and the ensuing debate over terrorism reinsurance might as easily lead to delay of federal chartering.
For one, priorities have shifted. Congress and the Bush Administration are totally absorbed in tackling the perils of a deepening recession while fighting a war on two fronts. In such an atmosphere, a new federal program might easily become a back-burner issue.
For another, there have been few complaints about how the industry and its state regulators have conducted themselves in this time of crisis.
"One needs to look no further than New York," Mr. Ramirez wrote in remarks prepared for the NAII annual. "State Superintendent of Insurance Greg Serio and his staff responded to a regulatory challenge of unprecedented proportions in a manner that was skillful, timely, thoughtful and fair."
And he quotes U.S. Senator Phil Gramm, R-Texas–never one to toss bouquets in the industrys direction–who said recently: "The insurance industry has been as responsible as any business in America, and I dont say that lightly."
Most importantly, Mr. Ramirez points to the strong signals the Administration has sent, by way of the Treasury Department, that it is for state regulation of insurance and against federal oversight. In fact, Treasury Secretary Paul ONeill flat out said as much.
Weighing these opposing forces, Mr. Ramirezs head (and heart) tell him that delay in the federal regulatory debate is in the wind–at least for the moment.
However, another terrorist event of consequence could change that in a hurry and build pressure for federal involvement, however disinclined the Administration and many members of Congress might be to do so.
But should delay come about, it would buy time, perhaps a couple of years, and then perhaps two or three more as the whole process begins anew. In that time, the forces of state regulation (the NAII most emphatically included) have a new opportunity to put some steam back into the bold initiatives for streamlining the state system pursued so aggressively until his departure last year by George Nichols, the former Kentucky regulator who at the time was president of the National Association of Insurance Commissioners. Mr. Ramirez thinks it can happen under the emerging leaders of the NAIC.
This would be good news indeed for the many, like Mr. Ramirez, who see federal intervention as more threat than tonic, and a sleek state regulatory mechanism as the preferred way, perhaps the only way, to a more competitive, less regulated marketplace.
Thomas J. Slattery is NU's executive editor at large. He can be reached at tslattery@nuco.com.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 12, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.