As legislators craft reform measures for the financial services industry, insurers are asking to be excluded from funding a bailout mechanism for systemically risky companies.
In testimony before the Senate Finance Committee, Patrick Baird, AEGON USA chairman told Senators that since state laws prohibit insurers from engaging in excess or risky leveraging, they should not be subject to the proposed Financial Crisis Responsibility Fee. “We do not believe that insurers should be identified as an industry that inordinately benefited and therefore needs to be taxed to recoup government funds,” Baird said, testifying on behalf of the American Council of Life Insurers. “Like most of Main Street America, our industry was a victim of the recession, not a perpetrator.”
Property/casualty insurers also stressed that they posed little or no systemic risk to the overall economy. In his testimony, Dylan Jones, federal affairs director for the National Association of Mutual Insurance Companies (NAMIC), noted that while many banks are leveraged at ratios as high as 30:1, the average property/casualty insurer’s leverage is 1:1.
“By its name alone, the Financial Crisis Responsibility Fee implies that it should be paid by those responsible for the crisis,” Jones said “Asking companies who played no role in creating the crisis, and who neither sought nor received any taxpayer dollars from the TARP, to pay for the operational or regulatory failures of banks and other non-insurance institutions is inequitable and would create competitive distortions.”
Jones also noted that none of NAMIC’s roughly 1,400 members took part in the U.S. Treasury’s TARP program.
“The stated goal of this fee is to protect the residents of Main Street and recover the amounts they provided to Wall Street,” Jones said. “Subjecting mutual and reciprocal insurers to the proposed fee will have the opposite impact by making these companies and their policyholders pay twice for something they did not create – once with their tax dollars and a second time through the recovery fee. These Main Street consumers should not be assessed for the risky investment losses of large commercial and investment banks.”
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