Insurers are offering qualified praise of H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009, which passed in the House by a margin 223 to 202 on Friday.
Intended to reform financial services regulation in light of the economic crisis, the legislation includes several measures aimed squarely at the insurance industry, including the creation of a federal insurance office housed within the Treasury Department.
“We are encouraged that the legislation establishes a federal office of insurance and believe that this provision offers a substantial contribution toward broadening and deepening our nation’s understanding of the critical role of insurance in our financial system,” Leigh Ann Pusey, president and CEO of the American Insurance Association, said in a statement.
Charles Chamness president and CEO of the National Association of Mutual Insurance Companies (NAMIC) said the organization was pleased the bill conformed the national insurance office to the existing state-based regulatory framework. “NAMIC is encouraged by the efforts made to narrowly tailor the purpose and authority of the Federal Insurance Office during the legislative process,” Chamness said.
Chamness was also buoyed that insurers would not come under the purview of the newly created Consumer Financial Protection Agency. However, he said insurers should not have to pay into proposed dissolution fund to unwind “systemically risky” companies.
“As NAMIC has said throughout the past year, there’s no metric by which a property/casualty insurer would be considered ‘systemically significant,’” Chamness said. “Property/casualty insurers are required by state regulators to maintain high reserves, low leverage ratios and to participate in resolution mechanisms to mitigate against insolvencies. Forcing them to pay assessments for a federal resolution authority would effectively be asking insurance consumers to foot the bill for the failures of other financial institutions.”
Pusey agreed that insurers should not to pay to bailout companies elsewhere in the financial services sector. “To the extent property/casualty insurers are considered in these reforms, the nature of our business and regulatory standards, our existing resolution and guaranty processes, and the general risk our industry poses to the broader financial system has to be recognized,” she said. "AIA opposes legislation that subjects our industry to pre-funding obligations for systemically important financial companies and assesses insurance companies to pay for the risks presented by the failure of non-insurance institutions.”
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