Two bills with large implications for the insurance industry have passed the House Financial Services Committee.
H.R. 3996, the Financial Stability Improvement Act of 2009 passed by a vote of 31-27, while H.R. 2609, the Federal Insurance Office Act of 2009 advanced by a voice vote.
Although the former is being widely hailed by insurance associations, the latter is eliciting concerns from those who feel the bill will unduly penalize insurers in the broader effort to stamp out systemic risk. H.R. 3996 establishes an inter-agency council, the Financial Services Oversight Council, which would be entrusted to regulate financial companies it deems as posing a systemic risk to the overall economy. The bill also requires firms with assets of more than $50 billion to pay into a fund designed to aid in the resolution of troubled companies.
“Put simply, by any measure suggested by members of the committee—size, interconnectedness, leverage or market share—property/casualty insurers do not fall into the category of ‘systemically significant,” Jimi Grande, SVP of federal and political affairs for the National Association of Mutual Insurance Companies said in a statement. “Insurers already operate under high capital requirements and with resolution mechanisms in place at the state level and through guaranty funds. Including them in a pre-event assessment would force insurers and their customers to shoulder more of the burden of failures at other, non-insurance institutions.”
The progress of the Financial Insurance Office Act is receiving more universal acclaim but is also raising some concerns. “Today’s vote by the House Financial Services Committee is a good first step in ensuring that the property-casualty insurance industry will finally have a voice at the national level,” said Leigh Ann Pusey, president and CEO of American Insurance Association. “While we remain supportive of the creation of this office, we still have concerns that the language contained in the current version of this legislation will not provide the office with the adequate authority it needs. Without such authority, it could limit the federal government’s ability to advocate our industry’s interest at the international level.”
The Independent Insurance Agents & Brokers of America (IIABA) praised inclusion of an amendment to H.R. 2609. The amendment, offered by House Capital Markets and Insurance Subcommittee Chairman Paul Kanjorski (D-Pa.), Rep. Travis Childers (D-Miss.), and Rep. Erik Paulsen (R-Minn.), exempts insurance agents and agencies from mandatory data collection requirements aimed at insurers. “Without this amendment, the newly created Federal Insurance Office (FIO) would have inadvertently had the ability to require countless agents, brokers, and adjusters to produce any data and information that the FIO might demand,” Robert Rusbuldt, IIABA president & CEO said in a statement.
Both bills may come to the House floor for a final vote as early as next week.
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