National Association of Mutual Insurance Companies

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'We've Made Excellent Progress on McCarran-Ferguson, But We Must Remain Vigilant,' NAMIC Members Told

The fight to preserve the McCarran-Ferguson limited antitrust exemption is moving forward, but there's more to be done, said NAMIC President and CEO Chuck Chamness. Chamness made the comment during yesterday's special teleconference held to update NAMIC members on the efforts to support McCarran-Ferguson.

Chamness was joined on the call by NAMIC's Senior Vice President for Government Affairs Carl Parks, Senior Federal Affairs Director Marliss Browder, and outside counsel Julie Gackenbach.

"Preservation of McCarran-Ferguson in its current form is critical for our industry and is NAMIC's highest legislative priority," Chamness said. "We have made excellent progress, but our job is far from finished."

During the teleconference, NAMIC announced a new online discussion board, or an online exchange. "It's a place to pose questions, seek advice, and share knowledge of McCarran with your peers," Browder said. McCarran experts will monitor the site and provide answers to questions.

Parks pointed out ways in which NAMIC is the industry leader in the fight to save McCarran – from developing its online resource center, which includes various materials to assist NAMIC members in addressing the issue with lawmakers, regulators, the media, and other interested parties; to coordinating a joint industry letter. Through action alerts and other member contacts, NAMIC has enjoined its members in a call to action. "Our message is being well received," Parks said, "but we must keep up our efforts."

Bills pending in both the House and Senate would repeal the antitrust exemption under McCarran-Ferguson. "This really is the worst of all worlds," Gackenbach said. She explained that under this scenario, states would retain the regulatory authority over insurers, but the Federal Trade Commission would also have jurisdiction. "There could even be conflicting regulation," she said.

Gackenbach, a leading expert on McCarran-Ferguson, outlined the ways a repeal of the antitrust exemption would threaten the industry. "Effective operation of modern insurance markets is dependent on a high degree of cooperative activities," she said. "Loss of the exemption would throw a number of critical insurance industry practices into jeopardy and the cooperative activities that the courts have consistently held are the business of insurance could be imperiled by the imposition of an overlapping level of federal antitrust authority."

Repeal of McCarran-Ferguson would likely result in a ruling that development of prospective advisory loss costs are unacceptable. While data sharing is the most obvious threatened activity, the common and necessary practice of cooperative development and operation of assigned risk plans and other residual markets that provide vital coverage to those who can't find coverage in the voluntary markets could be threatened as well.

As an alternative to repeal, some lawmakers are proposing a series of safe harbors designed to protect specific industry practices, such as data sharing. However, this would cause many of the same problems as repeal, the members were told. "It would result in years of litigation," Parks said. "It couldn't address all the changing needs of our industry."

Some proponents of an optional federal charter are using the McCarran-Ferguson debate as a means to advance their position. However, "for the most part, people recognize that this legislation would be disastrous, and it shouldn't be used as a vehicle for OFC," Parks said.

Still another threat is that the proposal to repeal McCarran-Ferguson will be tacked on to seemingly unrelated, though important, legislation, such as extending the Terrorism Risk Insurance Act.

If or when either McCarran repeal bill will be marked up in Congress is yet to be seen. According to Parks, a bill is more likely to move on the Senate side, if at all. The good news, he said, is that the "Congressional calendar may play to our advantage." As debate continues over proposals to revamp the nation's immigration laws and legislators continue looking into actions by the attorney general and the sub prime lending industry, it may be less likely for lawmakers to focus on McCarran. But with the threat still looming, Parks said, now is not the time to become complacent.

"As the old saying goes, 'the squeaky wheel gets the grease'," Parks said. "Lawmakers pay close attention to correspondences from their constituents, and it is essential that you stay in close contact with your lawmakers through letters, visits and phone calls, so they are reminded of the impact of this issue on the people they care about the most – business and constituents in their districts."

Direct questions to NAMIC's Senior Director of Federal Affairs Marliss Browder.

Posted: Tuesday, May 22, 2007 12:00:00 AM. Modified: Friday, June 08, 2007 12:44:22 PM.

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