NAIFA GovWatch

Administration Releases Systemic Risk and Office of National Insurance Proposals

Issue: Financial Services Regulatory Reform

Date: July 23, 2009

Action Taken: Late yesterday the Treasury Department sent to Capitol Hill a series of draft legislative proposals to further the Obama Administration’s regulatory reform agenda. Of particular importance to the insurance industry are the proposals to establish a systemic risk regulator and to create a federal office of insurance information.

Office of National Insurance: The legislation would create a NAIFA supported proposal to establish an office of insurance expertise within the inner sanctum of the federal government. The purpose of the office would be to weigh in and provide advice and counsel to Congress when the federal government is considering policy matters that are national and international in scope. The Administration’s proposal would call the new entity the Office of National Insurance (ONI). The authority of the ONI would extend to all lines of insurance except for health. The major functions of the office would be to:

Gather insurance data and information from insurers;
Monitor the insurance industry, including identifying gaps in regulation that could contribute to systemic risk issues;
Recommend to the Federal Reserve that it designate an insurer or insurance affiliate as a financial holding company subject to Federal Reserve systemic risk oversight;
Administer the Terrorism Risk Insurance Act;
Represent the US internationally at the International Association of Insurance Supervisors (IAIS) and in the negotiation of international regulatory agreements;
Preempt state insurance measures that conflict with international agreements (the authority is very limited and subject to a review and comment period – for more information click on memo linked below);
Consult with the states on insurance matters; and
Advise the Secretary on domestic and prudential international insurance policy issues.

In response to the Administration’s ONI proposal, NAIFA issued the following press release: http://www.naifa.org/newsevents/releases/20090723_office.cfm

Systemic Risk Oversight: The legislation would do what has been discussed for several months now – provide the Federal Reserve Board with authority to designate certain entities as systemically important, including insurance companies, and to subject such entities to enhanced regulatory oversight. NAIFA has expressed support for the establishment of a systemic risk regulator provided that the insurance industry’s functional regulators have a formal role in providing advice and counsel to the regulator so that policyholders are protected. NAIFA is extremely concerned that the Administration’s proposal excludes insurance regulators from any systemic risk oversight role. Those concerns, along with details of the proposal, are explained in the following memo: http://www.naifa.org/advocacy/documents/proposal_07232009.pdf

Next Steps: NAIFA is supportive of the Administration’s efforts to establish an Office of National Insurance, but we have serious concerns that the systemic regulation proposal does not appropriately recognize the need for a systemic risk regulator to work directly with functional insurance regulators. We are concerned this lack of coordination may cause more harm in our sector than good. We will continue our dialogue with the Administration, Congress, and our industry partners, to work to ensure the insurance sector is appropriately represented if Congress establishes a systemic risk regulator.

AHIA/NAIFA Staff Contact: Jill Edwards, Assistant Vice President, Federal Government Relations

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