A year after the financial services conflagration caught spark, insurers may be about to see new regulation spurned by it.
Indeed, one of the most direct legislative responses to the crisis, a proposed Consumer Financial Protection Agency (CFPA) may well be first to pass.
“That may well be the first piece of legislation to move forward,” said Neil Alldredge, VP State & Policy Affairs, for the National Association of Mutual Insurance Companies, speaking at CSC Future Focus in Orlando, Fla. Alldredge acknowledged concerns over the bill, which the House Financial Services Committee is expected to consider next week.
Another piece legislation with major implications for insurers is also gathering speed. H.R. 2609, the Insurance Information Act, sponsored by Rep. Paul Kanjorski (D.-Pa.), looks to establish an office of National Insurance (ONI) housed within the U.S. Treasury Department. While the ONI was originally conceived as a repository of insurance knowledge at the federal level, and a unified voice in international agreements, it is now being posited to help squelch systemic risk.
“This version of the bill has a lot more teeth than before,” Alldredge said. “If you are one of those companies [considered a systemic risk], your regulatory world is going to change.”
Alldredge said systemic risk fears about property/casualty insurers may be overstated, noting P&C insurance can’t cause the same domino effect as banks can, and are not subject to “runs” as banks are. “It’s hard to imagine a ‘run’ on a P&C insurer,” he said.
Yet, he allowed that greater federal regulatory scrutiny for insurers became inevitable in wake of the travails of American International Group.
“AIG turned a spotlight on the insurance sector,” he said. “The regulatory attitude now is: ‘more is better.’ The days of working to streamline regulations are over.”
“We’ve spent the last 18 months on the defensive,” he added.
In addition to the federal level, Alldredge said NAMIC is fighting “a host of bad ideas” at the state level, noting that 25 states are currently pondering bans on credit scoring. “I thought we were done with that issue.”
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