Insurance Machine

While detractors are complaining that the idea of being optional has been taken out, supporters of an optional federal charter for insurers are giving high praise to the latest proposal for a system of federal regulation.

Two weeks ago the proposed National Insurance Consumer Protection and Regulatory Modernization Act was outlined by Congressmen Melissa Bean, D-Ill., and Ed Royce, R-Calif. While the bill's actual language I yet to be revealed, it appears to be built on earlier bills introduced by Ms. Bean and Mr. Royce, bills designed to create a system for insurers and producers of optional federal charters.

The sponsors of the bill have provided an outline of the bill that shows it to be aimed at establishing a national system of regulation and supervision for nationally registered insurers, producers and agencies. According to the sponsors of the bill, the states would still maintain responsibility for regulating state-licensed insurers, producers and agencies.

In accordance with yet an additional section the legislation was to create an office of national insurance. This office would set guidelines for national insurers while overseeing both their financial and market conduct. A national guaranty corporation for national insurers is also created by the bill. This would function if a state guaranty association did not provide policyholders with a level of protection that is equivalent to the NAIC model standards. The outline referred to standards set by the Kansas City, Mo based National Association of Insurance Commissioners.

Regulator for systemic-risk
To monitor insurers, the bill also creates a new systemic-risk regulator. This innovative regulator would confer on a number of issues, with the office of national insurance, including the determination of the most effective form of functional regulation for what are considered to be systemically important institutions.

The bill is designed to make it clear that within a holding company structure, the office of national insurance has the authority to access the financial records of all affiliates. It also states that to be regulated at the holding-company level as an insurance holding company by the office of national insurance, federally registered insurance holding companies must have a predominant share of insurance businesses.
In yet an additional departure from prior federal insurance regulation bills, to handle consumer complaints, the new bill will open a branch of the office of national insurance in each state. It is the complaint of several critics of previous optional-federal-charter bills that they did not do enough to guarantee sufficient consumer protection.

The new measure is being hailed as a step forward by supporters of previous optional-federal-charter bills.
Senior vice president at The Council of Insurance Agents and Brokers in Washington, Joel Wood, says that this new approach that is being outlined by Reps. Bean and Royce is both thoughtful as well as being principled and that his organization supports the bill. He describes it as being the natural results of comprehensive insurance reform and that it takes into account a radically altered political landscape.