The Restoring American Financial Stability Act of 2010 would establish an Office of National Insurance in the Treasury Department to monitor the insurance industry and coordinate international insurance issues. The legislation also includes language from the Nonadmitted and Reinsurance Reform Act, which would simplify reinsurance regulation across states, establish a common system to allocate and remit surplus lines premium taxes, and allow risk managers to access surplus lines markets more directly.
The bill builds on Sen. Dodd's earlier proposal last November.
Sen. Dodd's plan also would establish the Financial Stability Oversight Council, an independent agency that would recommend to regulators rules on large, complex companies that could pose a systemic risk.
Sen. Dodd said most of the bill enjoyed bipartisan support and included ideas from lawmakers on both sides of the aisle. He said he is optimistic it can secure bipartisan votes, and dismissed calls from Republicans on the Senate Banking committee to allow more time to craft the legislation.
“We don't have many days left to actually get a job done, so there is a sense of urgency,” Sen. Dodd said at a news conference. “We've spent a lot of time these past two years and we haven't exhausted the subject matter, but you could go on for years and not exhaust the subject matter…It's time now to make the decision.”
Industry reaction continued to be mixed.
Surplus lines trade groups were pleased that the Nonadmitted and Reinsurance Reform Act was included in the Restoring American Financial Stability Act.
“The NRRA provisions will enable the surplus lines industry to operate more efficiently and effectively,” National Assn. of Professional Surplus Lines Offices President Marshall Kath said in a statement.
The New York-based Risk & Insurance Management Society Inc. also is pleased the surplus lines legislation was included, said Scott Clark, director of the external affairs committee for RIMS. He said Sen. Dodd’s proposal includes two other longstanding RIMS priorities: a federal office of insurance information and a requirement that some publicly held corporations create risk committees that include at least one risk management expert.
“I think that’s a great step forward for the risk management profession and for RIMS as well,” Clark said.
However, Leigh Ann Pusey, president and CEO of the American Insurance Assn. in Washington, said the legislation would penalize “insurers for the mistakes of riskier financial firms.” In particular, Pusey took issue with including insurers among those regulated by the systemic risk regulatory regime.
“Our consumers are already protected through existing insolvency and state guaranty mechanisms, which our industry funds to ensure that each and every insured claim is fulfilled,” Pusey said. “These mechanisms have a proven, decades-old track record of safeguarding insurance consumers.”
Pusey continued, “Even in the case of (American International Group Inc.), where problems from risky financial activities outside its regulated property and casualty subsidiaries (could have) led to its demise, we believe our industry could have withstood the collapse of its property/casualty insurance operations.”