Posted on 03 Dec 2009
Property casualty insurance companies do not pose a systemic risk to the U.S. economy and should be excluded from legislation to oversee financial institutions, the National Association of Mutual Insurance Companies (NAMIC) said.
H.R. 3996, the Financial Stability Improvement Act of 2009, was approved today by the House Financial Services Committee and will head to the House floor, where it is expected to be considered as part of a larger package that will also include H.R. 2609, the Federal Insurance Office Act of 2009 also being considered by the committee today.
“Put simply, by any measure suggested by members of the committee – size, interconnectedness, leverage or market share — property casualty insurers do not fall into the category of ‘systemically significant,’” said Jimi Grande, senior vice president of federal and political affairs for NAMIC. “Trying to force an insurance company to operate under these banking-centric regulations would be a significant problem.”
H.R. 3996 establishes a Financial Services Oversight Council which would be granted the power to designate financial companies it deems as posing a systemic risk to the overall economy for heightened regulation. The bill also establishes a fund to aid the unwinding of troubled firms that would be assessed on a pre-event basis.
“Insurers already operate under high capital requirements and with resolution mechanisms in place at the state level and through guaranty funds,” Grande said. “Including them in a pre-event assessment would force insurers and their customers to shoulder more of the burden of failures at other, non-insurance institutions.”