U.S. House Offer on Senate Financial Services Overhaul Bill Seeks to Clarify State Insurance Regulation of International Insurance Agreements

Upholding state regulation in regard to international insurance agreements negotiated by the U.S. Treasury will be among the insurance-related topics in a United States Senate and House of Representatives conference committee meeting scheduled to commence today, June 15, 2010. 

During the meeting, which is expected to last well beyond one day, legislators will seek consensus on differences between respective versions of financial services reform legislation passed in recent months.  These bills are considered to be the most comprehensive effort to overhaul the nation’s financial regulatory system since the 1930s.

In advance of today’s meeting, U.S. House Financial Services Committee Chairman Barney Frank released a House offer that seeks to revise S. 3217 (also known as the “Restoring America’s Financial Stability Act“), which the Senate passed on May 21, 2010 by a vote of 59-39.   Before it can be sent to President Obama for consideration, the legislation must now be merged with the House version, H.R. 4173 (known as  The Wall Street Reform and Consumer Protection Act), that was passed on December 11, 2009 by a vote of 223-202.

The House offer covers four areas of S. 3217:

• Title V – National/Federal Insurance Office
• Title IV – Regulation of Advisers to Private Funds and Others
• Title IX, Subtitle C – Improvements to the Regulation of Credit Rating Agencies
• Title III – Transfer of Powers to the Comptroller of the Currency, the Corporation, and the Board of Governors

Specifically in relation to the National/Federal Insurance Office provisions of S. 3217, the House seeks to:

• Change the name of the “National Insurance Office” to “Federal Insurance Office” (“FIO”)
• Add a House requirement that the U.S. Treasury must coordinate with the U.S. Secretary of Health and Human Services in determining which lines of insurance are excluded from FIO authority as health insurance.
• Add House provisions to include the United States Trade Representative (“USTR”) and the relevant Congressional committees in the process by which the Treasury negotiates, finalizes and enforces international insurance agreements. This package of related changes includes:
  • Requirement that Treasury coordinate international insurance agreement negotiations with USTR;
  • Requirement for Congressional “consultation and lay over” before international insurance agreements can be used to preempt inconsistent state insurance provisions;
  • Requirement for de novo judicial review of FIO administrative finding that a state insurance measure is inconsistent with an international insurance agreement;
  • Replacement of the Senate definition of “International Insurance Agreement on Prudential Measures” with the House’s “covered agreement” definition that requires international agreements to provide for regulatory protection “substantially equivalent” to regulatory protection as currently provided by state insurance measures.
• Add a House provision requiring the FIO to make a Paperwork Reduction Act showing before requiring insurers to produce information. The base text of the Senate bill requires the FIO to “coordinate” with state and federal agencies/regulators to determine if the desired information is available from sources other than directly from insurers; however, it does not require the FIO to secure information from an alternate source if available; and
• Add a House study on U.S. and global reinsurance markets.

 To view the additional financial regulatory components of the House offer, click on the hyperlinks above.

Should you have any questions or comments, please contact Colodny Fass.

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