WASHINGTON – The Senate Banking Committee on Thursday will take up legislation aimed at ensuring state regulators have a role in establishing international insurance rules.
The primary purpose of the legislation is to reduce the regulatory burden imposed on community banks through the Dodd-Frank regulatory reform law of 2010.
But it is also expected to contain language easing concerns by insurers such as Allstate and State Farm that they could be regulated by the Federal Reserve, according to several sources.
It is unclear whether the legislation will contain provisions providing insurers designated as financial significant financial institutions (SIFI) the ability to “off-ramp,” as dubbed by securities analysts - that is, to escape regulation by the Federal Reserve.
Banking Committee Chairman Sen. Richard Shelby, R-Ala., has been working for weeks to craft anti-regulatory legislation that will overcome the 60-vote procedural hurdle needed to win passage in the full Senate.
However, Democrats have been balking, and Shelby has imposed a gag order on the negotiations over what will the bill will include.
However, sources close to InsuranceNewsNet indicate that the bill will contain the full language of the legislation introduced April 27 by Sen. Dean Heller, R-Nev., and Sen. Jon Tester, D-Mont.
The bill would establish an Insurance Policy Advisory Committee on International Capital Standards and other insurance issues at the Fed. It also would require the Fed and the Treasury Department to issue an annual report as well as to give congressional testimony on insurance activities at the International Association of Insurance Supervisors (IAIS) and Financial Stability Board.
The language is aimed at assuaging concerns by state regulators and smaller insurers that international banking rules currently under negotiation would establish higher capital standards than imposed now by state regulators. They also are concerned that the international rules would make it easier for foreign insurers to enter their markets.
Both concerns were voiced at recent Senate and House hearings. For example, at a late April House Financial Services Committee hearing, Rep. Blaine Luetkemeyer, R-Mo., chairman of the Housing and Insurance Subcommittee, said rules changing the way state regulators can participate in meetings of the International Association of Insurance Supervisors “continues to cause consternation in the industry.”
The Heller/Tester bill would also require the Fed and the Treasury, in consultation with the National Association of Insurance Commissioners (NAIC), to complete a study on the impacts on consumers and markets in the U.S. before supporting any international insurance proposal or international insurance capital standard.
Another provision would supports efforts to increase transparency and public observer access to working groups and meetings at IAIS.
InsuranceNewsNet Washington Bureau Chief Arthur D. Postal has covered regulatory and legislative issues for more than 30 years. He can be reached at [email protected].
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