If one were to summarize the reaction of insurance industry associations to Senator Chris Dodd's financial reform bill it would be: "If it aint broke, don't fix it." The bill includes provision for a Office of National Insurance (ONI) and the requirement for some large insurers, among other financial services firms, to contribute to a "resolution mechanism," involving a fund to enable the liquidation of failing financial institutions. An excerpt from an open letter published by the American Insurance Association (AIA):
"AIA and its member companies support common-sense reforms aimed at fixing what caused the financial crisis and avoiding future systemic problems, but penalizing insurers for the mistakes of riskier financial firms is not the appropriate public policy response. The property-casualty industry didn't cause the financial crisis and hasn't benefited from the bailout. While we're still reviewing the draft legislation, initially we have some serious concerns."
Among those concerns are the bill's provision to include insurers within a systemic risk regulatory regime, including the pre-funded resolution mechanism.
The National Association of Mutual Insurance Companies (NAMIC) expressed concerns of its own.
"It is important to remember, however, that virtually every examination of the crisis has shown that property/casualty insurers played no role in creating the crisis and pose no systemic risk to the overall economy," comments Jimi Grande, senior vice president, federal and political affairs, NAMIC, in a statement from the organization. The statement proceeds:
A remaining concern for NAMIC is the broad subpoena authority granted to the proposed Office of National Insurance created by the legislation. Although the legislation states specifically that the ONI would not serve in any regulatory or supervisory capacity with regards to the industry, it would still grant it the subpoena authority to compel companies to produce data.
"Insurance is the most regulated industry in the country, and there is no shortage of data that would be available to the ONI either publicly or through the National Association of Insurance Commissioners," Grande said. "The use of subpoena authority in this context could have unintended negative consequences by creating a duplicate and excessive process that would ultimately harm the consumer it seeks to protect."
The NAMIC statement went on to quote Grande in praise for Dodd bill's "respect" for "the strong regime of consumer protections with regard to property/casualty insurance at the state level."If one were to summarize the reaction of insurance industry associations to Senator Chris Dodd's financial reform bill it would be: "If it aint broke, don't fix it."
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio