WASHINGTON (May 4, 2010) The National Association of Mutual Insurance Companies (NAMIC) encouraged members of the Senate Finance Committee to focus efforts to recoup the money paid out through the Troubled Asset Relief Program on those companies who received taxpayer dollars during the financial crisis.
In testimony submitted to the committee before a hearing today, NAMIC noted that the property/casualty insurance industry is highly competitive, well capitalized and poses little or no systemic risk to the overall economy. As the largest association representing property/casualty insurers, NAMIC opposed using federal money to bail out any property/casualty insurance companies, and none of NAMIC’s roughly 1,400 members took part in the TARP program.
“By its name alone, the Financial Crisis Responsibility Fee implies that it should be paid by those responsible for the crisis,” said Dylan Jones, NAMIC federal affairs director. “Asking companies who played no role in creating the crisis, and who neither sought nor received any taxpayer dollars from the TARP, to pay for the operational or regulatory failures of banks and other non-insurance institutions is inequitable and would create competitive distortions.”
In proposing the fee, President Obama asserted that it would be structured to require the “largest and most highly leveraged Wall Street firms” to repay taxpayer assistance. However, as proposed, the administration would assess the fee based on the liabilities of covered entities without regard to the types of liabilities involved or in consideration of the level of liability compared to the firm’s equity. While many banks are leveraged at ratios as high as 30:1, the average property/casualty insurer’s leverage is 1:1.
Imposing the fee would be especially unfair for mutual and reciprocal insurers that are owned by their policyholders, Jones argued, effectively charging them as both taxpayer and owner of their insurance company.
“The stated goal of this fee is to protect the residents of Main Street and recover the amounts they provided to Wall Street,” Jones said. “Subjecting mutual and reciprocal insurers to the proposed fee will have the opposite impact by making these companies and their policyholders pay twice for something they did not create – once with their tax dollars and a second time through the recovery fee. These Main Street consumers should not be assessed for the risky investment losses of large commercial and investment banks.”
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Posted: Tuesday, May 04, 2010 9:47:15 AM.
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