The insurance industry is expressing widespread, if conditional support, for the passage of S. 3217, Restoring American Financial Stability Act of 2010.
The bill, which will profoundly change how the financial services industry is regulated, passed the Senate by a margin of 59-39. Many proposed amendments odious to the insurance industry, including efforts to repeal antitrust protections for health insurers and have the industry contribute to a bailout fund for systemically risky companies, failed to make the legislation.
“The regulatory reform bill that the Senate passed appropriately recognizes that the property-casualty insurance industry does not pose systemic risk,” Leigh Ann Pusey, president and CEO of the American Insurance Association, said in a statement. “The existing state-based resolution mechanism remains in place and policyholders remain protected by the state guaranty fund system.”
David Sampson, president and CEO of the Property Casualty Insurers Association of America, also expressed thanks that insurers would not be called upon to fund resolution of companies in other parts of the financial services industry. “Every industry should pay for its own failures and protect its consumers,” Sampson said. “That is why insurers already have effective resolution funds in every state.”
Indeed, considering the depth of the economic crisis and the populist and legislative fervor for reform, insurers that favor the current regulatory structure may count themselves lucky that major changes to the current system are widely excluded from the reforms. In the immediate wake of crisis, the long-running debate of whether to provide an optional federal charter (OFC) for insurers was rekindled. Despite the fact that the bill creates an Office of National Insurance within the Treasury Department, the state-based regulation of insurance is left intact by the legislation.
“The Big ‘I’ is grateful that the Senate financial services regulatory reform legislation leaves day-to-day regulation of the insurance market at the state level,” says Robert Rusbuldt, president & CEO of the Independent Insurance Agents & Brokers of America. “In fact, the state regulatory system, while in need of more uniformity and efficiency, has a proven track record of ensuring insurer solvency, industry competition and growth, and consumer protection, and we believe the House and Senate have both made the correct decision in recognizing the strength of the state regulatory system for insurance."
With the bill clear of the Senate, it must now be reconciled with H.R. 4173, the Wall Street Reform and Consumer Protection Act, which passed the House last December. “While we continue to have concerns with certain provisions in the bill, we appreciate the distinction made between insurers and others in the financial sector,” Pusey said. “Given the importance of these reforms, AIA will remain active to ensure that the unique nature of insurance is preserved through any conference activity and into the bill's implementation.”
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