A bill recently introduced in the House of Representatives, the National Insurance Consumer Protection Act (NICPA), would establish a national system of regulation and supervision for nationally registered insurers to monitor the systemic risk to the economy from the insurance market. Under the bill, states would maintain responsibility for regulating state-licensed insurers, agencies and producers.
Regulation would be overseen by an Office of National Insurance under the Treasury Department whose commissioner would be appointed by the president. The national office would identify insurers that pose a risk to the U.S. financial system, and those companies would be required to be federally regulated. Companies not considered a risk would have the option to choose between state and federal regulation.
The bill responds in part to the $187-billion bailout of AIG in 2008.
“Never before has the federal government been so invested in an industry it has no regulatory authority over,” said U.S. Rep. Ed Royce, R-Calif., a co-sponsor of the bill. “Leaving the business of insurance regulation solely to the various state insurance commissioners, while the federal government provides taxpayer-funded assistance is simply irresponsible.”
American Insurance Association (AIA), Allstate and State Farm all support the bill.
“We have long supported the availability of a market-based federal charter for insurers and believe it is the best model for modernizing our insurance regulatory structure,” said AIA President Leigh Ann Pursey. “Any federal regulatory system should focus on true consumer protections like strong financial regulation and market conduct oversight, and we are encouraged to see those protections as the cornerstone of this legislation.”
The Property Casualty Insurers Association of America (PCI) opposes the bill because it singles out large companies within the insurance industry.
“An optional federal charter…falsely presumes that only large companies pose a systemic risk,” PCI President and CEO David Sampson said. “In fact, smaller companies can pose significant systemic risk, and larger companies may pose little or none.”
Click HERE to download a fact sheet about the bill.
