At a hearing entitled “Insurance Oversight: Policy Implications for U.S. Consumers, Businesses and Jobs,” members of the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity considered the potential impact of the Dodd-Frank Act, international regulatory developments and the state of insurance regulation.
Andrew Furgatch, chairman of the Magna Carta Companies, a NAMIC member, spoke on behalf of the property/casualty industry. In his testimony, Furgatch reiterated NAMIC’s strong argument that property/casualty insurers do not pose a systemic risk to the economy and should not be designated as such by the FSOC.
“Property casualty insurance companies, even large ones, are generally not systemically risky,” Furgatch said. “They do not have the characteristics of systemically risky firms, i.e., they are not highly leveraged, are not highly interconnected with other financial firms, pose no ‘run on the bank’ threat, are highly competitive with low market concentration, have low failure rates, and have an effective regulatory system for resolving those few firms that do fail. Even the failure of a very large property casualty insurer would have no significant impact on the overall US economy.”
In testimony submitted to the committee, NAMIC voiced support for “cooperation and coordination” amongst global financial services regulators, but cautioned the committee to remain on guard against the intrusion of international agencies on the domestic insurance market.
“Such cooperation and coordination should not come at the cost of abdication of regulatory authority to foreign jurisdictions or quasi-governmental bodies,” NAMIC said in testimony. “Likewise, authority to enter into agreements and bind U.S. insurers and insurance regulators should not depend solely on the discretion of the Secretary of the Treasury.”
Since the financial downturn began in 2008, NAMIC has consistently made the case that property/casualty insurers did not contribute to the crisis and in fact the market has remained strong and competitive. Congress, noted NAMIC senior vice president of federal and political affairs Jimi Grande, recognized as much in its efforts to reform the financial system.
“In crafting the Dodd-Frank Act, Congress recognized the unique nature of property/casualty insurance among financial services products, and wisely chose to reinforce the current state-based regulatory structure rather than add a federal layer,” Grande said. “As the insurance related entities that were created in the law, such as the Federal Insurance Office, the Financial Stability Oversight Council or the Office of Financial Research, take shape, Congress must be vigilant against any ‘mission creep’ or expansion beyond the law’s intent.”