Senate legislation aimed at curbing federal regulation of insurance is running into headwinds, and markup of the legislation by the Senate Banking Committee has been delayed a week.
Sen. Richard Shelby. R-Ala., chairman of the panel, announced late Friday that he would accede to the request from all 10 Democrats on the committee for time to look at the proposed legislation. Reports are that the substance of the bill could be released as early as today.
As a result, the markup has been delayed from this Thursday to next Thursday, May 21.
The decision was seen as a negative for enactment of legislation substantially rolling back provisions in the Dodd-Frank financial services reform that gave the federal government some oversight of insurance activities.
Ryan Schoen of Washington Analysis said he thinks the Shelby proposal “will run into stiff opposition from Democrats and even some Republicans.”
Ultimately, Schoen said that because of opposition, any final bill will likely merely raise the threshold for designation as a systemically important financial institution (SIFI) to $100 billion or slightly higher from the current $50 billion authority of the Financial Stability Oversight Council (FSOC) to designate entities as SIFI based on a host of factors or, “the entire deal falls apart due to partisan bickering.”
The delay puts in doubt enactment of a provision of the Shelby bill that would ensure that 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.
In their letter, the Democratic members of the committee said they wished to “express our concern and great disappointment with your plan to consider broad legislation in the Senate Banking Committee without giving all committee Democrats time to analyze and review your proposal.”
The letter said that the Democrats are “ready, willing, and able” to work with Shelby to provide regulatory relief to financial institutions like community banks and credit unions.
“However, a markup in one week on a broader proposal will not lead to a positive” result, the letter said. “Given that you have not shared text of the legislation with all members of the Banking Committee, we are writing to inform you that we will be united in opposition if you go forward as planned,” the letter said.
Besides regulatory relief for community bankers, Shelby wants to add provisions easing concerns by such insurers as Allstate and State Farm that they could be regulated by the Federal Reserve.
The insurance industry also wants provisions included that will allow insurers designated as financial significant financial institutions (SIFI) to “off-ramp,” as dubbed by securities analysts, that is, to escape regulation by the Federal Reserve.
These requests were voiced by various insurance industry representatives in hearings held the last week of April. They have strong support from members of the Senate Banking Committee and the House Financial Services Committee.
One of the provisions believed included in the Shelby bill would give the insurance industry and especially the National Association of Insurance Commissioners a stronger voice in shaping international capital standards.
NAIC members want to play a key role, besides the Federal Reserve and the Treasury Department, in the activities of the International Association of Insurance Supervisors (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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