Rep. Bill Posey, R-Fla., has introduced legislation that would correct and clarify several provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act to ensure that the property/casualty insurance industry is not financially on the hook for failures on Wall Street. The Insurance Consumer Protection and Solvency Act of 2012, H.R. 6423 was introduced with Rep. Judy Biggert, chairman of the House Financial Services Subcommittee on Insurance and a former NAMIC Legislator of the Year recipient.
Originally conceived as one of several Dodd-Frank "corrections" bills that NAMIC has been working on with subcommittee staff over the last year, H.R. 6423 makes clear that it was, and is, congressional intent that insurance companies be treated as unique from others in the financial services sector. First, in order to preserve the state guaranty fund system, it codifies that insurers will not be subject to the Federal Deposit Insurance Corporation's authority to resolve large failing financial firms. Instead, in the event of insolvency, insurers will continue to utilize the mechanisms already in place at the state level.
A second provision seeks to protect the assets of insurance subsidiaries of financial institutions from being used by the FDIC when resolving a failing firm to cover the losses of its other entities. State regulators carefully monitor insurers' investments and assets and the bill would set up a strong wall of protection to prevent the FDIC from potentially threatening the solvency of these insurance subsidiaries.
The final provision prohibits the FDIC from assessing fees on insurance companies to help fund the "orderly liquidation" of failing financial institutions. As NAMIC has said from the very beginning of the financial crisis, property/casualty insurance was not the source of the trouble and property/casualty insurance companies do not pose a systemic risk to the U.S. economy. By forcing insurers - based solely on their size - to have to pay large sums of money for a fund that they do not want and will not need is not fair and could have far-reaching impacts on insurance markets. Further, it in essence subsidizes further risky behavior by complex financial firms that are not on the hook in the event of an insurer insolvency.
NAMIC will be working closely with both Reps. Posey and Biggert's office and will be drafting a letter of support for their important legislation. We will continue to find ways to correct and limit Dodd-Frank's impact on our industry.
Contact: Jimi Grande
Senior Vice President, Federal and Political Affairs
Posted: Tuesday, September 18, 2012 5:36:30 PM. Modified: Wednesday, September 19, 2012 10:13:28 AM.
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