Trades Decry 'Weakening' National Insurance Office Bill

NU Online News Service, May 6, 10:37 a.m. EST

WASHINGTON–Eight insurance industry trade groups have written the Senate urging it to reject an amendment they said would "substantially weaken" the proposed Office of National Insurance's authority to address international trade issues.

The amendment, crafted by Sen. Jeff Merkley, D-Ore., would narrow the authority of the Treasury Department, where the ONI would be located, to negotiate international insurance trade agreements without the approval of state insurance regulators.

While many insurance organizations are opposing the amendment, the National Association of Mutual Insurance Companies has said it supports the language crafted by Sen. Merkley.

The letter from the eight trade groups in opposition, said the proposed amendment requires the ONI to "navigate a procedural labyrinth" before entering into the applicable international agreement. These include extensive notifications/consultations with the United States Trade Representative, two congressional committees and the insurance commissioners on what is "essentially a regulatory, not a trade, issue."

It then subjects that decision to a post-hoc Administrative Procedures Act notice and comment process, the letter noted.

The letter said the proposed Merkley amendment would also require that if the ONI director determined that a proposed trade agreement would be inconsistent with state law that his decision would be subject to a judicial review- ensuring that his finding "receives no deference at all."

The Merkley amendment would replace the current language in the Senate bill dealing with preemption authority of the ONI as contained in Title V of the Restoring Financial Stability Act of 2010 (S. 3217).

The bill is now being debated on the Senate floor.

In arguing against the Merkley amendment, the trade groups said that enabling the United States to engage in and conclude international regulatory agreements with foreign nations on solvency issues and ensuring "uniform and equitable treatment for foreign and domestic insurers and reinsurers alike fosters the growth of the United States markets, as well as job creation."

Their letter to Senators said that Sen. Merkley's amendment acknowledges the importance of international insurance agreements on solvency issues and negotiations, "including on standard-setting."

At the same time, however, the proposed amendment "strips the ONI's ability to address those issues in a meaningful way in the United States by making the limited preemption process effectively unattainable," the groups wrote.

The result, their letter said, "is that no regulatory entity would be empowered to deal with important insurance international regulatory issues."

This, "not only further undermines the credibility of the current state regulatory system, but it is not in the consumers' interest," said the letter.

The current language in the Senate Banking Committee bill "provides appropriate due process while still allowing for limited preemption to effectuate these important international insurance agreements," according to the trade groups.

They called the bill "critical to U.S. companies and ultimately to U.S. consumers."

The letter was signed by officials of the American Insurance Association; the Financial Services Roundtable; the Council of Insurance Agents & Brokers; the Association of Bermuda Insurers & Reinsurers; the American Bankers Insurance Association; the Risk and Insurance Management Society, Inc.; the American Council of Life Insurers; and the Reinsurance Association of America.

In support of the amendment NAMIC said it believes "that any federal legislation must recognize the strength and primacy of the state-based regulatory system for insurance and that any pre-emption of state authority should be narrowly limited in scope, and for that reason we support Sen. Merkley's carefully written amendment. The amendment would ensure that pre-emption occurs only when absolutely necessary, while still allowing domestic insurers to remain competitive on a global scale."