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Life Insurance Chiefs Ask Treasury for Federal Office(BestWire Services Via Acquire Media NewsEdge) Chief executives of 36 U.S. life insurers have signed a letter to Treasury Secretary Henry Paulson, asking that he follow through with plans to create a federal Office of Insurance Information to monitor developments in the industry. Federal legislation proposing a Treasury Department OII cleared a House subcommittee earlier this year, but became stalled on the House floor in the wake of the Federal Reserve's $85 billion loan package to American International Group. A planned Sept. 17 vote on H.R. 5840, the Insurance Information Act, was withdrawn following concerns voiced by Rep. Jackie Speier, D-Calif., about whether the bill could pre-empt California's 20-year-old Proposition 103 regulatory regime. But even without legislation, Treasury could create an office to focus on insurance without any pre-emptive power, the life insurers chiefs argue, noting "such an office would provide your department with the best means of efficiently gathering publicly available information on our business as you and other policymakers evaluate the appropriate regulatory oversight of U.S. financial institutions." "Although we realize you are currently grappling with issues that require your immediate attention, we hope you will continue to support the creation of an information office as part of the reforms likely to be implemented by your department in the coming months," the company chiefs wrote. Among the signatories was Allstate Chairman Thomas J. Wilson, Allianz Life Chief Executive Officer Gary C. Bhojwani, Lincoln Financial CEO Dennis R. Glass, Pacific Life Chairman James T. Morris, Genworth Chairman Michael D. Fraizer, Principal Financial CEO Larry D. Zimpleman, Nationwide CEO Jerry Jurgensen, MassMutual Chairman Stuart H. Reese, Protective Life Chairman John D. Johns and State Farm Chairman Edward B. Rust Jr. American Council of Life Insurers President Frank Keating noted in a statement that the executives represented companies, all ACLI members, including "life insurers of every size and market profile ? large and small, primary companies and reinsurers." "Although life insurance is currently regulated exclusively by the states, while banks and securities firms have federal regulators, these industries interact in ways that could affect the financial markets across the nation," Keating said. "However, there is no structure in place at the federal level to monitor life insurance markets and evaluate how issues affecting life insurance companies and consumers relate to broader financial concerns." The chief executives also offered their services to Paulson as the federal government continues with implementation of its Troubled Asset Relief Program. In their letter, they promised to provide "any information..that may be useful as you consider how to best address the troubles currently facing the U.S. financial sector." Insurers are included among the financial institutions that may sell residential mortgages, mortgage-backed securities and other distressed financial assets to the newly created Office of Financial Stability under the $700 billion Emergency Economic Stabilization Act signed by President Bush earlier this month. A.M. Best has identified emerging investment risks for life insurers in commercial mortgages, including both direct loans and securitizations; asset-backed securities such as credit card receivables and automobile loans; alternative investments such as limited partnerships and hedge funds; and prime residential mortgage-backed securities. Rep. Paul Kanjorski, D-Pa., sponsor of the Insurance Information Act, and House Financial Services Chairman Barney Frank, D-Mass., both have promised they would return the measure to the floor. Under the bill, the OII would be empowered to enforce international insurance agreements and would have some limited authority to pre-empt state law, but no direct regulatory powers. The office primarily would be charged with keeping track of development in all lines of insurance, except for health insurance. The House currently stands in recess prior to the election, but both chambers are planning a lame duck "rump" session following the November polls. Under Kanjorski's legislation, where the new federal office finds inconsistencies between international agreements and insurance regulation, the Treasury secretary would be responsible to determine whether the measure would be pre-empted, and, in a number of circumstances, would first be required to stay the pre-emption. Congress would have authority to object to any pre-emption of a state insurance measure. The federal Administrative Procedures Act, including the option of judicial review, also would apply to the pre-emption process. (By R.J. Lehmann, Washington bureau manager: [email protected]) Copyright ? 2008 A.M. Best Company, Inc. |