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New Bill Would Create Federal Insurance Office

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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.

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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.”

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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.”

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Click HERE to download a fact sheet about the bill.  

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