House Subcommittee Moves Key Federal Insurance Regulation Bills
By Andrea Wells
In a busy month for insurance issues on Capitol Hill, the U.S. House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises marked up bills creating a federal office of insurance information, creating a national licensing registry for insurance producers and expanding risk retention groups from commercial liability into commercial property coverage.
HR 5840, the Insurance Information Act of 2008, would establish an Office of Insurance Information within the U.S. Department of the Treasury. Additionally, the bill has clearly defined and strictly limited preemptive powers applicable only if state laws conflict with United States international trade agreements.
The National Association of Insurance Commissioners (NAIC) offered its conditional support of the measure, provided that the definition and scope of agreements are tightened to enhance the ability of insurers and reinsurers domiciled in U.S. states or territories to expand access to foreign markets, while maintaining domestic consumer protections.
“Some members of Congress and industry lobbyists have made claims that this bill is the first step to an ‘optional federal charter’ for insurance,” said NAIC President and Kansas Insurance Commissioner Sandy Praeger. “Every insurance commissioner strongly believes that an OFC is the worst possible public policy choice for insurance. The NAIC unequivocally opposes any attempts to use this bill as a vehicle for such a misguided policy.”
Marc Racicot, president, American Insurance Association (AIA), which as been a longtime supporter of an OFC, says “an immediate need exists for federal expertise regarding the important national and international insurance trends in today’s rapidly changing and globalized marketplace.” Racicot claims an Office of Insurance Information would be a valuable tool that would enable the United States to speak with one voice on important insurance matters and for establishing U.S. leadership globally on developing international standards for insurance regulation.
Nonresident Licensing
Another piece of legislation to make headway this month is a bill of particular importance to agents and brokers. The bipartisan HR 5611, the National Association of Registered Agents and Brokers Reform Act of 2008 (NARAB II), would create a national licensing registry for insurance producers while preserving the rights of states to supervise and discipline insurance agents and brokers.
This legislation modifies the original NARAB provisions of the Gramm-Leach-Bliley Act to immediately establish NARAB as a private, non-profit entity managed by a board composed of insurance regulators and marketplace representatives. The NARAB board created by this legislation would not be part of, or report to, any federal agency and would not have any federal regulatory power.
“The Big ‘I’ has long supported the use of targeted federal legislation to reform the state system of insurance regulation,” says Robert Rusbuldt, president and CEO of the Independent Insurance Agents & Brokers of America. “The most serious regulatory challenges facing our members are the redundant, costly and contradictory requirements that arise when they seek licenses on a multi-state basis. The NARAB Reform Act solves these problems through targeted reform and modernization of nonresident agent and broker licensing without affecting resident licensing.”
The nation’s insurance regulators say that while they support the latest version of NARAB II, this is a unique case and should not be misinterpreted to support any further preemption of state laws.
“Insurance regulatory reform should always begin and end with the states,” Praeger said. “The NAIC recognizes that streamlined nonresident producer licensing is an important goal, and we believe that the targeted approach taken by the manager’s amendment to H.R. 5611 achieves that objective without compromising state consumer protections.”
Liability Risk Retention Act
The House subcommittee also made several technical corrections to the “Increasing Insurance Coverage Options for Consumers Act of 2008” (HR 5792) originally introduced in April. The bill expands the Liability Risk Retention Act (LRRA) to allow risk retention groups (RRGs) to write commercial property insurance.
In addition to fine tuning existing legislative language, a new provision was added to HR 5792 that would require the Government Accountability Office (GAO) to examine whether there is unlawful interference in the operation of RRGs by non-domiciliary regulators.
The Self-Insurance Institute of America Inc. (SIIA) welcomes such oversight, said SIIA President Dick Goff. “We believe that the ‘single regulator’ structure as envisioned by the LRRA is being improperly compromised by the actions of some non-domiciliary regulators. These actions have obviously had a negative impact within the RRG marketplace,” he said.
HR 5840, HR 5792 and HR 5611 were ordered to the full committee, with favorable recommendations.