Participants In Treasury Confab Mostly Mum

Treasury Department officials are refusing to give details of a meeting held yesterday with insurance and banking industry representatives to discuss possible administration support for optional federal chartering of insurance companies.

Industry participants said the session was courteous and it was significant that it had been held, but that it would provide few substantive details of the discussions.

Treasury officials declined to confirm or deny the meeting. “We're not going to get in the business of confirming, denying or commenting on individual, private meetings,” a spokesman for the agency said.

The official also said that the agency, and as a result, the Bush administration, “has not taken a position on the issue.”

The session was requested by Treasury Department officials as the agency considers what approach to take to chartering legislation expected to be introduced in February by Sens. John Sununu, R-N.H., and Tim Johnson, D-S.D.

That bill would allow life and property-casualty insurers the option of being regulated by an agency that would be created within the Treasury Department.

The meeting and introduction of the legislation sometime in February are the beginning of what is expected to be an intense lobbying campaign by both supporters and opponents of the OFC this year.

The Wednesday meeting with Emil Henry, assistant secretary for Financial Institutions at the Treasury, was requested by the Treasury to hear the arguments of OFC supporters in the insurance industry, according to Kevin McKechnie, a lobbyist for the American Bankers Insurance Association.

Mr. McKechnie would not comment on the session beyond saying Treasury officials requested the meeting “because there has been a lot of talk about the issue.” He said Treasury officials want to know what our proposal “looks like,” from the perspective of “industry stakeholders supporting such legislation.”

The American Council of Life Insurers, a number of whose members attended the meeting and which is lobbying strongly for Congress to hold hearings soon on the Sununu/Johnson bill, had little comment.

All ACLI spokesman Jack Dolan would say is, “We're looking forward to the Senate Banking Committee's review of optional federal charter legislation this year.”

But Lisa McGreevy, executive vice president for external affairs of the Financial Services Roundtable and president of its Government Affairs Council, said today that the meeting was “significant.”

The FSC represents large financial services companies, including insurance companies. It has established creation of an optional federal charter for both property-casualty and life insurers as a top priority for this year. The FSC's president, Steve Bartlett, made the announcement at a meeting today.

It's significant, Ms. McGreevy said, “because for the first time the Treasury Department has asked for and initiated a discussion about the OFC.”

Ms. McGreevy said that as Treasury officials get involved in the insurance marketplace, it is natural for them to gather information so they can better understand the various policy options everyone is talking about.

She also cited the comments of Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee, establishing state insurance regulation as one of the issues the panel will take up this year.

“As Sen. Shelby said last Tuesday, he is looking at it,” Ms. McGreevy said, “and it will be natural for members of Congress dealing with the issue to ask Treasury officials about their views.”

Staff officials for both Sens. Sununu and Johnson did not return phone calls seeking comment on their bill, but Dennis Kelly, a spokesman for the American Insurance Association, said “indications are that the bill will be introduced later in February.”

“We support the modernization of insurance regulation,” Mr. Kelly said. “Insurers should have the option of being regulated under a market-based system that is uniform and allows competitive forces, not regulatory approvals, to shape the development of products to best serve the needs of consumers.”

Mr. Kelly added, “We are hopeful that legislation to modernize insurance regulation would be introduced this year.”

Supporters of the legislation include the American Bankers Association, of which the American Bankers Insurance Association is a part, the ACLI, the Financial Services Roundtable, the American Insurance Association, and the Council of Insurance Agents and Brokers, Mr. McKechnie said.

American Council of Life Insurers officials were not available to comment.

Hearings and introduction of a bill that would establish federal minimum standards for state regulators is expected within the next several months by the House Financial Services Committee.

It is unclear if and when the Senate Banking Committee will hold hearings and act on an OFC bill, but industry lobbyists say a number of CEOs of American Council of Life Insurers members have been asking members of the Senate Banking Committee for a prompt hearing on the OFC issue.

Opponents of the legislation include members of the National Association of Insurance Companies, small insurers such as those represented by the National Association of Mutual Insurance Companies, and members of the Independent Insurance Agents and Brokers of America.

Under the Sununu/Johnson bill, a federal insurance office would be established within the Treasury Department. It would be vested “with the authority to charter national companies and agencies and to implement the statute governing their activities.”

According to an outline of the bill obtained by National Underwriter, this office, and the single appointed regulator responsible for its activities, would regulate solvency, market conduct and accounting for federally chartered entities.

Mr. McKechnie said the bill has the support of the “overwhelming majority of life companies and most of the “large p-c companies,” that is, p-c companies representing more than half of p-c premiums.

Smaller insurers, mostly those which operate within one state, constitute the “fault line” of those maintaining that state regulation should be sustained, he said.