Trade Groups Split Over Treasury Proposal

The divide is based on the fact that the legislation sent to Capitol Hill late Wednesday gives the proposed agency stronger authority to preempt state regulation than that proposed in legislation creating the similar Office of Insurance Information legislation introduced in April by Rep. Paul Kanjorski, D-Pa., chairman of the Capital Markets Subcommittee of the House Financial Services Committee.

A provision allowing the federal government to negotiate foreign treaties without congressional approval is also stirring concern.

Specifically, one lawyer said, there is no provision in the Treasury legislation that would allow the Secretary of the Treasury to stay the preemption.

Moreover, it also does not provide Congress with the power to nullify a preemption determination.

Earlier, the American Insurance Association voiced support for the Treasury bill, but the Independent Insurance Agents and Brokers of America said the preemptive power was too strong.

In the latest reaction, Joel Wood, senior vice president, government affairs for the Washington, D.C.-based CIAB, said he supported Treasury's bill, noting, "We think that this is a good proposal and that Congress should adopt it.

"It's pretty hard to argue the point that there shouldn't be a seat at the international table for American insurers, and that state laws that interfere with international obligations should be preempted," he continued.

"While we'd like to see the legislation go further on preemption, we think that this is thoughtful, measured, consistent with the ideology of House and Senate congressional leaders on financial services issues, and we hope that it will be a part of broader regulatory reform efforts this year," he added.

However, Jimi Grande, NAMIC's vice president for federal and political affairs and Charles Symington, senior vice president, government affairs for the Independent Insurance Agents & Brokers of America headquartered in Alexandria, Va., voiced concern.

Mr. Grande said NAMIC has "long supported" legislation proposed last year by Rep. Kanjorski creating the OII.

He called this "a targeted approach to improving insurance regulation without upending the current state-based system that has protected consumers and companies throughout the financial crisis."

Mr. Grande added that, NAMIC is "pleased" the administration's proposal for an Office of National Insurance did not include regulatory authority or supplant the current state based model, "but we have some concerns with the information gathering provisions."

"We hope that the administration will consider endorsing the OII, which would meet the stated goals of the administration to create an agency that would gather information, develop expertise, negotiate international agreements, and coordinate policy in the insurance sector," he said. Additionally, Rep. Kanjorski's OII proposal "has already won support from key stakeholders and the majority of the industry," he added.

David Sampson, president and CEO of PCI, said he is "particularly pleased" with the Treasury bill's provision that provides a small company exemption, as well as the language on data confidentiality and affirmatively leaving prudential regulation of insurance at the state level, "where it is closest to consumers."

He advised, however, "there are some issues we look forward to working on with Congress and the Administration to improve, most notably the possibility of entering into international agreements without seeking Congressional approval.

"We are ready to work with the Administration, Treasury and Congress moving forward in order to shape sound regulatory reform," he added.