On Thursday, June 4, NAMIC attended a meeting at the White House to discuss the administration’s plans to release a set of proposals for regulating the financial services sector. While the meeting was not solely focused on insurance, representatives from the administration gave all attendees a chance to weigh in with their views on regulatory reform.
The administration intends to unveil a reform proposal on June 17. Although the details are still being worked out, the proposal will include the creation of a systemic risk regulator who would closely monitor significant threats to the financial system and take action to address those threats. The proposal is also expected to include a resolution authority that would grant the federal government the power to unwind large, complex financial institutions that are in trouble.
The administration also wants to focus on enhancing consumer protections, and the proposal will likely include the formation of an agency to oversee the safety and soundness of financial products such as credit cards and mortgage-related products. The proposal will be very similar to legislation creating the Financial Products Safety Commission that has already been introduced in Congress.
Some meeting attendees used the opportunity to rehash much of the debate regarding the creation of a federal charter for insurance companies. NAMIC reiterated our support for a reformed system of state-based regulation and warned against creating any type of dual or mandatory federal regulatory model. NAMIC pointed to the relative strength and solvency of the property/casualty insurance industry as indicative of the ways in which the current system is working.
NAMIC also made clear that any modernization strategy should avoid destabilizing the property/casualty insurance industry, which, throughout the financial crisis, has continued to serve and protect consumers and businesses on main streets across the United States. We pointed out that because of conservative and liquid investment portfolios, low leverage ratios, strong solvency regulation, and a highly competitive and diverse marketplace, the property/casualty insurance industry is fundamentally different than other financial services sectors. The administration officials in attendance appreciated NAMIC’s viewpoint and seemed to recognize the distinct nature of our industry.
Treasury Secretary Timothy Geithner is scheduled to testify on June 18 before the House Financial Services Committee on the proposed plans. Committee Chairman Barney Frank has stated that he plans to move a package of reforms through the House of Representatives prior to the August recess.
These administration proposals, if properly constructed, could be set up to work within the current regulatory framework. A systemic risk regulator is likely to look at only the largest and most complex financial institutions, and, as NAMIC continues to argue, the property/casualty insurance business is not a systemic threat. Additionally, the resolution authority will target only those systemically significant companies that are on the brink of collapse.
NAMIC will continue to work with the administration and Congress to help further guide this important debate and ensure that any new regulatory reform proposals do not negatively impact the property/casualty insurance industry.
Direct questions to NAMIC Vice President - Federal and Policy Affairs Jimi Grande.