WASHINGTON–Two members of the House said today they will introduce revised legislation that would lead to creation of a federal office of insurance regulation.
Rep. Melissa Bean, D-Ill., and Rep. Ed Royce, R-Calif., chief sponsors of the measure, said the bill would be different from prior drafts because it would call for tough protections for consumers and would work in concert with a system-wide regulator for financial services that is being discussed in Congress and by the Obama administration.
They said the legislation would be introduced after the President's Day recess.
As outlined by Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee last week, this regulator would have the authority to oversee the activities of any financial services firm, regardless of its products, if the institutions presented a potential risk to the financial system.
Rep. Bean and Rep. Royce said the bill would be different than past bills in that it would call for a federal consumer protection office in all states and that it would incorporate all the model laws of the National Association of Insurance Commissioners.
The proposed OIR would also have the power to oversee all the units of any insurance company that was federally regulated, not just the insurance units.
They announced their plans just a day after new Treasury Secretary Tim Geithner said in answer to a question at a Senate Banking Committee hearing that proposals for a federal insurance charter "have a lot of merit and they will be reviewed carefully."
Secretary Geithner made his comments in response to a question from Sen. Tim Johnson, D-S.D., who has several times in the past been a chief sponsor of legislation in the Senate creating an optional federal charter for insurers.
Specifically, Sen. Johnson said that the "largest corporate bailout so far has been an insurance company. Do you believe we can undertake serious market reform without federal regulation of insurance companies?"
In response, Secretary Geithner, explained that "I do believe an important part of reexamining supervision of financial institutions should include insurance companies."
In a conference call announcing their plans, Ms. Bean said that the decision by the Treasury announced Monday to not allow insurers to participate in the Capital Purchase Program of the under the Troubled Asset Relief Program established under the Emergency Economic Stabilization Act passed in September "makes an urgent case for passage of our legislation."
She explained that a likely reason insurers had been rejected for CPP funding was "that the federal government is leery about providing money to institutions it doesn't supervise."
At the same time, Blain Rethmeier, a spokesman for the American Insurance Association, a supporter of optional federal insurance charter legislation, said, "We view the news of Rep. Bean and Rep. Royce undertaking a new bill aimed at enhancing consumer protections and modernizing the way insurance is regulated as a very positive development."
Mr. Rethmeier added that this is "Especially so when their efforts are coupled with Secretary Geithner's comments yesterday that insurance is a critical part of the broad regulatory reforms needed and that a federal functional regulator for insurance has merit."
© 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.