Property/casualty insurers are objecting to provisions contained within regulatory reform legislation authored by Senate Banking Committee Chairman Christopher Dodd (D.-Conn.)
Foremost among the objections to the Restoring American Financial Stability Act of 2010 are concerns about funding to bailout failing financial institutions. In a letter to Dodd and Sen. Richard Shelby (R.- Ala.), the Property/Casualty Leaders Coalition said insurers should not be asked to pay for the risky activity of highly leveraged and less-regulated financial entities.
“In particular, we have grave concerns over a provision of the draft bill that goes beyond the initial $50 billion pre-event resolution fund that includes property/casualty insurers of a certain asset size on a post-event basis to fund the resolution of failing systemically risky institutions,” the letter sates. “By assessing insurance companies that do not engage in activities that put U.S. financial stability at risk and that are already assessed through state guaranty funds to cover insured claims of their insolvent competitors, this approach arbitrarily elevates company size and dilutes the bill's stated purpose of infusing greater caution into the behavior of those firms that present the greater risk of another crisis. It also creates a competitive disadvantage for those non-bank financial companies that are forced to pay the fee, even though none of them has been determined to be systemically risky.”
Another source of contention is the authority granted the proposed the Office of National Insurance. While the legislation specifies that the ONI would not serve in any regulatory or supervisory capacity, it would still grant it the subpoena authority to compel insurance companies to produce data.
“Insurance is the most regulated industry in the country, and there is no shortage of data that would be available to the ONI either publicly or through the National Association of Insurance Commissioners,” Jimi Grande, SVP of federal and political affairs for the National Association of Mutual Insurance Companies (NAMIC) said. “The use of subpoena authority in this context could have unintended negative consequences by creating a duplicate and excessive process that would ultimately harm the consumer it seeks to protect.”
The concerns over ONI notwithstanding, Grande said NAMIC was pleased insurers would not be part of the purview of the proposed consumer protection agency.
“While we remain concerned about some provisions in the bill, NAMIC applauds Sen. Dodd for his effort to address the problems in our financial regulatory system that contributed to the economic crisis we face today,” Grande said. “It is important to remember, however, that virtually every examination of the crisis has shown that property/casualty insurers played no role in creating the crisis and pose no systemic risk to the overall economy.”
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