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The U.S. House of Representatives passed legislation that would give Congress greater oversight over negotiations on international insurance standards and would allow the legislative body to step in to stop enforcement of potential agreements.
H.R. 4537, the International Insurance Standards Act of 2017, co-sponsored by Reps. Sean Duffy, R-Wis., and Dennis Heck, D-Wash., was adopted by a voice vote on Tuesday. The legislation, introduced in December, would require consultation with Congress and coordination with state insurance commissioners throughout negotiations of international standard-setting agreements.
The legislation was introduced as part of the response to the covered agreement reached between the United States and the European Union, which itself was a response to the bloc’s Solvency II directive. Federal legislators and the National Association of Insurance Commissioners complained about a lack of transparency in the covered agreement negotiations and expressed concern that the final agreement did not respect the U.S. state-based system of insurance regulation, but insurance trade associations argued at the time that the covered agreement was needed to avoid forcing U.S. reinsurers to take costly steps such as forming and capitalizing a branch or subsidiary in European countries.
The Property Casualty Insurers Association of America “applauds House members on both sides of the aisle for supporting the International Insurance Standards Act,” Nat Wienecke, senior vice president of federal government relations for Chicago-based PCI, said Tuesday in a statement. “This important bipartisan legislation reinforces the primacy of the state regulation of insurance.”
“This bill also recognizes the appropriate role of state insurance regulators in developing international insurance standards and provides that Congress receives appropriate notice to exercise its oversight over such negotiations,” he continued. “PCI calls on the Senate to take up and pass this bill and send final legislation to the president’s desk.”
“International negotiations can have serious consequences for the domestic insurance industry and its consumers,” Jon Gentile, national vice president of government relations of the Washington-based National Association of Professional Insurance Agents, said in a statement Tuesday. “Thankfully, Reps. Duffy and Heck came together on this common-sense legislation that seeks to protect state insurance regulation from harmful international developments, while giving Congress a role in preventing destructive international insurance agreements from hurting our successful domestic system.”
PIA strongly supports the bill’s grant of authority for congressional review, including the provision of congressional power to stop the enforcement in the United States of an “ill-advised” agreement, he said.
“This bill is pro-consumer and pro-state insurance regulation,” Mr. Gentile said.
However, Washington-based free market think tank The R Street Institute expressed disappointment with the bill, which it said would strip the Federal Insurance Office of its statutorily appointed role to negotiate covered insurance agreements and “inappropriately” delegate authority to stifle international negotiations to state officers.
Though improved from an “even more problematic draft” that passed the House Financial Services Committee on a 56-4 vote in December 2017, the measure remains “troubling” on several fronts, including that there is an argument that much of the bill represents an unconstitutional usurpation of executive authority in diplomatic relations, R.J. Lehmann, R Street’s director of finance, insurance and trade policy, said in a statement Tuesday.
“As we warned House members in February, our primary concern with this legislation is that it would return us to the pre-FIO status quo when trade negotiators seeking to advocate U.S. insurance interests abroad were limited in their ability to propose binding regulatory commitments,” he said. “The covered agreement process already has borne fruit, and we see no justifiable reason to curtail the valuable policymaking tools it offers.”
Among the biggest concerns is that the bill reassigns duties to negotiate covered agreements from the FIO director to the Treasury secretary, requires federal negotiators and representatives to international standards-setting bodies to “closely consult” and coordinate with state insurance commissioners, and compels reports on any proposed standard to explain its consistency or differences with federal or state laws or regulations, Mr. Lehmann said.
“The U.S. Supreme Court affirmed in its 2003 decision in American Insurance Association v. Garamendi that states, including their insurance commissioners, may not interfere with the president’s ability to conduct the nation’s foreign policy,” he said. “The National Association of Insurance Commissioners brings great knowledge and resources to discussions of insurance public policy. But it is, in the end, a private trade association, not a governmental body or interstate compact. It cannot displace the federal government’s role in international diplomacy, and we are confident the U.S. Senate and the White House will agree in that assessment.”
State insurance regulators are concerned about a lack of transparency in talks between federal officials and their European counterparts, as well as the implementation of new regulatory requirements in some European countries that are complicating January renewals for U.S. insurers and reinsurers and even costing them some business.