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House gets own version of federal charter bill

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House gets own version of federal charter bill

WASHINGTON--Supporters of allowing insurers and producers to choose federal rather than state regulation believe that introduction of the National Insurance Act in the House of Representatives will hasten their goal.

The bill, introduced last week, is companion bill to a bipartisan measure of the same name introduced in the Senate in May (BI, May 28). The House bill, which is sponsored by Reps. Melissa Bean, D-Ill., and Ed Royce, R-Calif., calls for creation an independent Office of National Insurance within the Treasury Department to oversee a system of federal insurance regulation. Insurers and producers could choose to be regulated by that office rather than state authorities.

Under the measure, federally chartered property/casualty and life insurers would not be subject to state rate and policy form regulation. The national insurers would, however, remain subject to state premium taxes.

At a Capitol Hill news conference last week, the bill's sponsors stressed their belief that optional federal charters would benefit consumers and insurers alike.

Rep. Bean said that the current "bureaucracy of 51 state regulators" stifles innovation by insurers, while Rep. Royce, who had introduced similar legislation late last year, said that allowing insurers to choose federal regulation would allow the industry to compete more effectively in the global economy.

The Risk & Insurance Management Society Inc. welcomed the bill.

"RIMS is encouraged that the optional federal charter bill will be introduced in the House," Terry Fleming, a member of RIMS' board, said shortly before the bill's introduction. "We look forward to reviewing the House version and hope it will gain bipartisan support for passage," he said.

The insurance industry, however, remains divided on the issue (see box, page 3).

But despite that, supporters of the bill remain optimistic the concept will move forward.

"This is the first time in 15 years that truly bipartisan bills have been introduced by respected members of the relevant committees in each chamber," said Joel Wood, senior vp of the Council of Insurance Agents & Brokers in Washington. "That alone represents a move forward. Furthermore, we have leadership in both the House and Senate who are very attuned to the need for progressive insurance regulatory modernization.... I think we have an outstanding opportunity to move this legislation from the back burner to the front burner by the end of this Congress."

"We're thrilled that a comprehensive OFC bill has been introduced in the House," said Leigh Ann Pusey, chief operating officer of the American Insurance Assn. in Washington. "It confirms that there is a lot of interest and desire to explore regulatory modernization in both the House and the Senate. We've got bipartisan co-sponsorship, and we look forward to moving this issue forward in the congressional debate."

An opponent of the bill, however, predicted that the effort would not get far.

"Politically, I don't think this is something that is likely to have more than just a hearing or two," said Justin Roth, senior director-federal affairs for the National Assn. of Mutual Insurance Cos. in Washington. "With the insurance industry being sharply divided on this issue, it's unlikely that Congress would move forward on this legislation."

Mr. Roth said NAMIC supports regulatory reform but "we don't think that creating a giant new federal bureaucracy will solve the problems that both companies and consumers would like to see addressed."


Divided response

Where some insurance industry, financial services and risk management groups stand on optional federal charter legislation:

Support

Agents for Change

American Bankers Assn.

American Council of Life Insurers

American Insurance Assn.

Council of Insurance Agents & Brokers

Financial Services Roundtable

Reinsurance Assn. of America

Risk & Insurance Management Society Inc.

Oppose

Independent Insurance Agents & Brokers of America

National Assn. of Mutual Insurance Cos.

National Assn. of Professional Insurance Agents

No position on current bill

Property Casualty Insurers Assn. of America