The Senate’s affirmation of financial services reform has many implications for insurers, but none as weighty as the creation of federal insurance regulator.
Section 313 of H.R. 4173, the Restoring American Financial Stability Act of 2010, mandates creation of a Federal Insurance Office housed within the Department of the Treasury. The primary function of the office (also known as the Office of National Insurance or “ONI”) is to “identify issues or gaps in the regulation of insurers that could contribute to a systemic crisis in the insurance industry or the United States financial system.”
While few, if any, would quibble with that part of the office’s purview, many in the industry raised objections to the office’s wider scope when it was first suggested in 2009. One particular area of contention was under what circumstances the new federal regulator could preempt state laws. Consequently, Rep. Paul Kanjorski (D.-Pa.) worked with both proponents and opponents of a federal charter for insurers to craft language that gave the ONI sufficient reach while maintaining the primacy of state insurance regulation.
Proponents of an ONI are pleased that U.S. insurers will have a unified voice to speak on international insurance matters.
“An ONI that engages in international agreements on important insurance measures will ensure uniform and equal treatment for both foreign and domestic insurers and reinsurers alike,” Frank Keating president and CEO American Council of Life Insurers, said in a statement. “This will help spur job growth and creation in the U.S. As state regulators are constitutionally prohibited from entering into such agreements, it is of utmost importance for the ONI to be empowered to effectuate international regulatory agreements on insurance matters through preemption.”
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