WASHINGTON (December 11, 2009) The National Association of Mutual Insurance Companies (NAMIC) responded today to the passage of H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009, by the U.S. House of Representatives.
Passed by a vote of 223 to 202, the bill combines several pieces of legislation into a broad-based reform of the financial services regulatory structure. Included in the bill is the creation of a new federal systemic risk regulator, an expansion of the government’s authority to resolve troubled financial institutions, the establishment of a Consumer Financial Protection Agency, and the creation of a new Federal Insurance Office.
“As its name suggests, this bill underscores Congress’ intent to address the issues that caused the financial crisis and ensure that consumers are protected from the next one,” said NAMIC president and CEO Charles M. Chamness. “More importantly, this bill respects the state-based regulatory framework for property/casualty insurance while creating an office to serve as a national information center.”
The FIO would serve an informational resource for Congress and federal policymakers on insurance issues in addition to assisting the coordination of international trade agreements. “NAMIC is encouraged by the efforts made to narrowly tailor the purpose and authority of the Federal Insurance Office during the legislative process,” Chamness said.
In addition to establishing the FIO, H.R. 4173 would create a separate Consumer Financial Protection Agency to address consumer protection issues with financial products, but specifically excludes property/casualty insurance from the jurisdiction of the new agency. “As insurers, NAMIC members are deeply concerned with the concept of separating consumer protection from soundness and solvency regulation,” Chamness said. “It carries a potentially serious risk of regulatory conflict and confusion, particularly as it relates to the business of insurance. We are pleased that the members of the Financial Services Committee recognized the problems this would cause and exempted the industry from this new agency.”
H.R. 4173 would also establishes a Financial Services Oversight Council with the power to designate financial companies it deems as posing a systemic risk to the overall economy for heightened regulation. To address the costs of insolvencies at these designated companies, the bill would create a fund to aid the unwinding of troubled firms that would be assessed on a pre-event basis.
“As NAMIC has said throughout the past year, there’s no metric by which a property/casualty insurer would be considered ‘systemically significant,’” Chamness said. “Property/casualty insurers are required by state regulators to maintain high reserves, low leverage ratios and to participate in resolution mechanisms to mitigate against insolvencies. Forcing them to pay assessments for a federal resolution authority would effectively be asking insurance consumers to foot the bill for the failures of other financial institutions.”
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Posted: Friday, December 11, 2009 12:00:00 AM. Modified: Wednesday, March 24, 2010 11:45:17 AM.
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