WASHINGTON—Three longtime risk management legislative goals moved considerably closer to reality last week with the Senate's approval of comprehensive financial services regulatory reform legislation.

Although the Restoring American Financial Stability Act of 2010 focuses largely on banks and investment firms, the measure also calls for establishing a federal insurance office in the Treasury Department.

Another provision would streamline surplus lines taxation and regulation, ease qualified risk managers' ability to access the surplus lines market, and reform reinsurance regulation.

A third provision would require some publicly held corporations to set up risk committees that include at least one risk management expert.

All of these reforms have been legislative objectives of the New York-based Risk & Insurance Management Society Inc. for the past several years.

Senate Banking, Housing and Urban Affairs Committee Chairman Chris Dodd, D-Conn., shepherded the measure, which he drafted, through four weeks of Senate debate. Ultimately, he was able to get four Republicans to support the measure, although he lost the support of two of his fellow Democrats.

The Senate action, however, is not the final word on the matter. The measure must be reconciled with a bill that the House approved last year.

While most of the differences between the measures deal with matters unrelated to risk management—such as the structure of a financial services consumer protection agency and whether financial services companies should be required to prefund a $50 billion pool to cover failing firms—the bills differ on how far the proposed federal insurance office could pre-empt state regulators. The Senate bill would give the office more power to do so on certain international insurance issues than would the House version.

Despite the differences, House Financial Services Committee Chairman Barney Frank, D-Mass., issued a statement shortly after the Senate vote expressing confidence “that we can have a bill ready for President Obama's signature very soon.”

RIMS welcomed the Senate's action on the bill.

“We feel very, very pleased that our hard work in moving forward these three agenda items as part of the bill will serve our membership well, and actually will elevate, in our opinion, the status of risk managers in their organizations,” said Scott Clark, RIMS secretary and director-external affairs.

RIMS wants the language establishing a federal insurance office to provide expertise at the Treasury to “be as strong as possible,” said Mr. Clark, who also is risk and benefits officer for the Miami-Dade County Public Schools in Miami. He noted that RIMS will hold its annual RIMS on the Hill legislative conference June 6-8 in Washington.

The president of the Washington-based Council of Insurance Agents & Brokers, which had the surplus lines reform atop its legislative priority list this congressional session, is optimistic that the reforms will become reality. The CIAB also strongly supported the federal insurance office.

“While the broader bills must now be reconciled, a process that could be contentious on several big issues, the surplus lines provisions appear to be quite secure,” CIAB President Ken A. Crerar said in an e-mail.

In addition, Mr. Crerar said, “We expect to see a flurry of efforts to change state law in anticipation of implementation of the surplus lines provisions.”

A group representing the surplus lines industry also hailed the Senate action.

“Senate approval of the language is a giant step toward achieving needed reforms of surplus lines regulation,” Richard Bouhan, executive director of the Kansas City, Mo.-based National Assn. of Professional Surplus Lines Offices Ltd., said in a statement.

The president and CEO of the Washington-based American Insurance Assn. said that while the group has some concerns about how provisions such as proposed restrictions on propriety trading could affect some members, AIA was pleased that the bill recognized that property/casualty insurers did not present a systemic risk to the financial system.

Financial services reform initially was approached with a “very bank-centric perspective,” said the AIA's Leigh Ann Pusey. “The concern was that if you're a large financial institution, including a large property/casualty insurer, you must be systemically risky.” But the bill distinguishes insurers from other financial institutions and leaves them in the state-based guaranty fund system that pays for the resolution of insolvent insurers rather than forcing them to pay into a pool to resolve other failed financial instructions, she said.

In addition, the federal insurance office “provision is one that we have always embraced,” Ms. Pusey said.

“We're glad to see this package nearing completion as it will bring more certainty back to the market,” said Jimi Grande, senior vp in the Washington office of the National Assn. of Mutual Insurance Cos. While not perfect, he said the package “certainly respects the state-based system of insurance regulation and, for the most part, recognizes the unique nature of property/casualty insurance.”

But Mr. Grande said NAMIC “absolutely” prefers the House bill's call for a more restricted federal insurance office.

The Property/Casualty Insurers Assn. of America also hopes “the final product adopts the House position on the federal insurance office and further distinguishes state-regulated insurers in the provisions relating to assessments and proprietary trading,” PCI President David Sampson said in a statement.

“We're pleased to see Congress continuing to make progress toward a more rational system of regulation for reinsurance,” said Frank Nutter, president of the Reinsurance Assn. of America in Washington.