Do you ever get the feeling that something is going on and whatever it is, it isn’t good?

Last month, PIA sounded a warning about the Treasury Department’s study of financial regulation. We pointed out that their request for comments appeared to be biased in favor of federal regulation of insurance and also in favor of foreign insurance entities, to the detriment of domestic U.S. carriers.

On December 11, 2007, U.S. Treasury Assistant Secretary for Financial Institutions David Nason gave a speech to the City of London Corporation in London, U.K. One of his topics was insurance regulation in the United States. Nason said that Federal officials are getting ready to look closely at insurance regulation while crafting a “blueprint for an improved U.S. financial regulatory structure.”

Nason said the current state-based system of insurance regulation “raises a number of issues with an international dimension,” and that this “can limit international firms’ operations in the United States.”

“As we evaluate proposals to modernize our own system of insurance regulation, we must consider what will best serve our interests and the global economy in maintaining an insurance marketplace that attracts capital and does not set up artificial and costly barriers,” Nason said.

Nason added that because “many political and parochial concerns” will lead to resistance to major changes, the department will propose some concrete, “intermediate steps” toward improving the financial services regulatory structure, but the department also wants to propose “broad ideas for an optimal regulatory structure to match the globally integrated U.S. financial services industry,” Nason said.

What It Means to Agents:  A little over two weeks after the comment period closed for the Treasury Department’s study of financial regulation, we have an assistant secretary giving a speech over in London finding fault with state regulation of insurance and proclaiming that Treasury will be proposing interim changes to insurance regulation.

Two weeks?  That’s not much study. It also buttresses our comment in our letter to Secretary Paulson that the request for comment was slanted in such a way that led us to conclude that “the Treasury Department may have already made up its mind regarding the recommendations that it will make.” Regrettably, we may have been all too accurate in our observation.

PIA’s primary concern is the continued success of the domestic U.S. insurance marketplace. As we have noted, we oppose changes in our system of regulation made solely to accommodate the competitive desires of any marketplace competitor, including alien insurers wishing to do business in the United States who may be more comfortable with European regulatory systems. We also note that Mr. Neson makes this statement:

“As we evaluate proposals to modernize our own system of insurance regulation, we must consider what will best serve our interests and the global economy…” [our emphasis added]

PIA believes that our system of insurance regulation must serve our nation’s interests. Putting our nation’s interests first is not being “parochial.” Putting our nation’s interests on an equal par with the interests of the global economy calls into question just whose interests the Treasury Department is seeking to advance. This is a case of bad public policy in the making.

Treasury Gets 350 Comments On Reform Proposal (National Underwriter 12/11/07)

Full Text of London Speech by Asst. Sect. Nason

PIA Letter to Treasury Secretary Paulson (PDF file, 11/13/07)

PIA’s Filed Comments in Response to Treasury Request (PDF file, 11/21/07)

Agents Tell Treasury Study Questions Biased (Insurance Journal 11/15/07)

Industry Split Over How Far To Let Feds Go With Regulatory Reforms  (National Underwriter 12/3/07)

December 19, 2007