WASHINGTON (July 24, 2012) Congress should continue its strong oversight of the implementation of the Dodd-Frank Act to prevent the expansion of the agencies created by the law and reduce uncertainty for property/casualty insurers, Charles M. Chamness, president and CEO of the National Association of Mutual Insurance Companies (NAMIC) said today.
Chamness testified before the House Financial services Subcommittee on Insurance, Housing and Community opportunity. The hearing was called to examine the costs of Dodd-Frank implementation for insurance consumers and the economy. Chamness noted that the property/casualty insurance market remains highly competitive and able to protect its policyholders despite the recent economic downturn and expensive catastrophic losses.
However, as Chamness testified, the sheer scope of Dodd-Frank has led to many changes in how insurance companies – particularly those that are large and diverse – deal with regulation. For example, the Federal Reserve has new responsibility for overseeing insurance companies that own depository institutions, but do not have a history of working with insurance companies.
“The Federal Reserve must recognize the distinct regulatory approaches required to properly supervise banks and insurance companies which entail different measures for capital, financial strength, and stability,” Chamness said. “One size does not fit all and the system for supervision should be tailored to this economic reality.”
Another serious concern is the Volcker Rule. Although Congress recognized insurers should be allowed to engage in proprietary trading and provided them an exemption from the Rule, without a final rule there is uncertainty that certain insurers will be allowed to invest in certain types of private equity funds. “Allowing insurers to continue in their normal ownership of interest in securities is essential to appropriately engage in effective, long-term investment strategies and avoid costly premium increases for policyholders,” Chamness said.
In his testimony, Chamness noted that while the state-based insurance regulatory system “was left largely intact” by Dodd-Frank, the law did create new agencies, such as the Federal Insurance Office and Office of Financial Research, which could add to the regulatory burden facing property/casualty insurers. As these new agencies continue to develop, Chamness called on lawmakers to prevent unnecessary federal encroachment into insurance regulation.
“It is clear that the property/casualty insurance industry plays a key role in the economy and every effort should be made to ensure that its markets are functioning,” Chamness said. “As we move forward, we would urge Congress to rectify any unintended consequences that are inevitable in any legislative initiative of this size and scope. The focus should remain on preventing unneeded and damaging interference in a well-functioning system.”
Contact: Matt Brady
Director, Federal Public Affairs
Posted: Tuesday, July 24, 2012 2:58:48 PM. Modified: Tuesday, July 24, 2012 3:01:32 PM.
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