On July 9, the House Capital Markets Subcommittee passed three insurance-related bills.

Insurance Information Act of 2008 (H.R. 5840) – A new office would be created to collect insurance data and information, analyze it and issue reports on insurance issues. The bill would also allow the Treasury Secretary to establish federal policy on international insurance issues and determine whether individual state policies are consistent with policies agreed to by the federal government and other governments or foreign regulators. The Secretary of the Treasury would have the power to recommend pre-emption of state policies that are not consistent with federal policy and international agreements.

The final version of the bill also expands this ability to pre-empt state insurance laws to include national insurance policy, which would be set by the Treasury Department. PIA opposes this bill.  PIA also questions the 11th-hour endorsement of this bill by the NAIC, because it attempts to cede regulatory authority held by all the individual states to the federal government. The NAIC is a trade association with no regulatory powers, and it has no authority to cede regulatory authority of any kind, established by statute and common law, on behalf of any individual state.

This bill is not what it started out to be. Originally intended to create an information office to assist Members of Congress in dealing with insurance matters, it has been hijacked by those who want to bring about federal regulation of insurance. As the drafting of this bill was underway in the lead-up to the July 9 mark-up, the bill became much more onerous. No longer focused just on an information office, the legislation was re-written to greatly expand the ability of the Treasury to pre-empt state insurance laws and regulations. Most significantly, it now would establish the Treasury as the entity that sets not only policies regarding international insurance issues, but national insurance policy as well. What does this mean? It is a grant of complete authority to the Treasury Secretary for all insurance matters that he and he alone declares are “national” in scope.

This seemingly minor change would have the effect of rendering null and void provisions established and affirmed in both the McCarran-Ferguson Act of 1945 and the Gramm-Leach-Bliley Act of 1999 that the States are the regulators of the business of insurance.

While the Treasury has said that the final bill approved by the subcommittee is narrow in scope, a review of the provisions reveals that not to be the case; in fact, the bill is now expansive. Treasury has also been saying the OII bill is not the first step to an Optional Federal Charter, but OFC’s prime sponsors in the House have already said it is. We believe Treasury is attempting to lull OFC opponents into a false sense of security, so they will not realize that H.R. 5840 is in many respects much worse than an OFC.

The title of this bill is a misnomer. It is a bill providing new, sweeping powers to the Secretary of the Treasury for all domestic and international matters in all lines of insurance (except health) that are declared by the Secretary to be of national importance.

That’s why we cannot believe that the NAIC signed off on this bill.

What It Means to Agents:  H.R. 5840 was hijacked by advocates of federal regulation of insurance, who turned it into a bill that proposes to transfer much of the authority of the states to regulate insurance to the federal government. PIA opposes this bill.

PIA Lauds NCOIL Warning to State Officials on H.R. 5840

National Association of Registered Agents and Brokers Reform Act of 2008 (H.R. 5611) – The panel also approved the National Association of Registered Agents and Brokers Reform Act of 2008, which would amend the Gramm-Leach-Bliley Act to re-establish the National Assn. of Registered Agents and Brokers as a nonprofit corporation that would provide a mechanism through which licensing and other insurance producer qualification requirements and conditions can be adopted and applied on a multistate basis. PIA is working with several other associations to improve it and has not taken a position on this bill.

Increasing Insurance Coverage Options for Consumers Act of 2008 (H.R. 5792) – This bill would allow risk retention groups to provide commercial property as well as liability coverage to their members.

July 16, 2008