Federal Charter Law PassageSeen As Unlikely This Year
Washington
Optional federal chartering of insurance companies, one of the most divisive issues facing the industry, stands little chance of being enacted into law this year, industry representatives generally agree.
Although legislation has been introduced in the Senate, and the House Financial Services Committee is expected to hold hearings on the issue, both advocates and critics of optional federal chartering say the issue probably will not advance beyond that this year.
Certainly, advocates of optional federal chartering will try to get the issue on the table, said Phil Anderson, senior vice president of federal affairs for the Washington-based American Council of Life Insurers. ACLI recently endorsed optional federal chartering after studying the issue for about two years and developing a draft proposal. (For details of this and other chartering proposals, see page 11.)
Mr. Anderson said ACLI will aggressively pursue optional federal chartering even while continuing to work at the state level to achieve regulatory efficiency. Moreover, he said, the Sept. 11 tragedy might have highlighted the need for some type of national regulation since the insurance problems that emerged were national in scope.
Leigh Ann Pusey, senior vice president of federal affairs for the American Insurance Association in Washington, which also supports optional federal chartering, agreed. "The debate over terrorism coverage forced Congress to come to the realization that it really doesn't know the industry well," she said.
This, she stated, could lead some members to consider supporting a federal regulatory agency.
But Julie Rochman, senior vice president of public affairs for AIA, added that this does not mean that optional federal chartering will happen this year. "We always looked at optional federal chartering as a multi-year process," she said.
She added that because Congress failed to resolve the terrorism reinsurance issue last year, the committees with jurisdiction over insurance will have to spend time dealing with terrorism insurance again this year. This could push back the timetable for dealing with optional federal chartering, she said.
Carl Parks, senior vice president of federal government relations for the Des Plaines, Ill.-based National Association of Independent Insurers–which does not support optional federal chartering–added that there is a significant political dimension to the Congressional agenda this year.
He noted that there will be an important midterm election in 2002. As a result, he said, the 2002 congressional session will be abbreviated as members seek to spend more time in their districts campaigning.
Optional federal chartering is not on the political agenda of either party, Mr. Parks noted. In fact, the only issues likely to receive serious consideration this year are those that play to the voters, he said, and that does not include optional federal chartering.
David Farmer, senior vice president of federal affairs for the Alliance of American Insurers in Downers Grove, Ill.–which also opposes optional federal chartering–agreed with this political assessment, adding that Congress is not going to be enthusiastic about tackling a subject like insurance regulation in 2002.
The discussion over optional federal chartering will begin this year, but given the macroeconomics of the industry, Mr. Farmer said, the issue is not likely to be warmly received. Moreover, he said, Congress will want to wait and see what the states are able to accomplish with regulatory modernization before seriously considering federal regulation.
Monte Ward, vice president of federal affairs for the National Association of Mutual Insurance Companies in Indianapolis–another opponent of optional federal chartering–added that he does not believe Congress would consider a "life insurance only" chartering bill. This is despite the fact that the ACLI, the country's major life insurance company association, supports optional federal chartering.
Any final legislation, he said, will likely cover the entire industry. Thus, even if a life-insurance-only proposal were introduced, NAMIC would go to Capitol Hill to register its opposition, Mr. Ward indicated.
Joel Wood, senior vice president of government affairs for the Washington-based Council of Insurance Agents and Brokers–which supports federal chartering–acknowledged that Congress seems to have little interest in getting deeply involved in insurance regulation.
He cited as an example the fate of the proposal developed by some in the industry to establish a terrorism reinsurance pool subject to federal regulation in the wake of the Sept. 11 tragedy, and the subsequent collapse of the terrorism reinsurance market.
The proposal, Mr. Wood noted, was dismissed by leading figures in Congress, who complained that it represented an unjustifiable creation of a federal role in insurance regulation. "We were all taken aback by the jitters expressed by Congress," he said. "Those of us who support federal chartering learned a big lesson."
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 28, 2002. Copyright 2002 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.
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