The OFC issue does not fall neatly along party lines, said Frank, D-Mass., noting its main sponsors are Rep. Melissa Bean, D-Ill. and Rep. Ed Royce, R-Calif. "There is a movement to federalize more of insurance law," he said.
State officials and others interested in the debate over a federal regulatory system for insurance should start contacting members of Congress now, he said. Frank said he kept federal charter discussions off the table during negotiations over the financial regulatory reform bill he co-authored, but said he will be a "neutral party" in the federal charter debate. Still, the former state lawmaker joked that one benefit of being a federal official is that he does not have to be involved in automobile insurance arguments.
"Insurance has been very well regulated at the state level," Frank said.
A federal option for insurance regulation would likely have minimal disruption on state consumer-protection laws, but would include consumer protections on the federal level as well, Frank said. One option worth considering is federal oversight of life insurance, which has more in common with other financial products than many insurance products, he said.
Rhode Island State Rep. Brian Kennedy said he is concerned about potential outcomes of the optional federal charter debate, both for state coffers and state-based consumer protections. "The states have put so many of those important consumer protections into place to deal with all sorts of insurance issues ... the states derive substantial premium taxes from the insurers that happen to be there. It still is left as a mystery," said Kennedy, chairman of the Communications, Financial Services and Interstate Commerce Committee of the National Conference of State Legislatures.
The House voted 237-192 to approve the financial reform bill, which will be known as the Dodd-Frank Act if signed into law. A Senate vote was delayed after the death of Sen. Robert Byrd, D-W.Va., but Frank said he believes there are now enough votes to overcome Republican objections.
The bill establishes a new Federal Insurance Office within the U.S. Treasury Department that would monitor the U.S. insurance industry and negotiate on its behalf for international prudential matters. It would have authority to determine when state laws conflict with international agreements, but those decisions will be subject to judicial review. It includes provisions supported by those leery of the new office, including a requirement that the office first seek data from state regulators before pursuing a reporting burden for insurance companies.
As constructed, the FIO would be informative without being disruptive to state-based insurance regulation, Frank told NCOIL attendees. It is important for the federal government to have a better understanding of insurance, he said. "There are no federal officials who know very much about it," Frank said.
NCOIL opposed the establishment of the FIO. The National Association of Insurance Commissioners supported it.