Sometimes you have to take a step back in order to see the whole picture clearly. When PIA reports on what advocates of federal insurance regulation are saying, usually the focus is on what they say in the insurance press, or in their statements to Congress. But supporters of Optional Federal Charters are also commenting in the insurance press in Europe. An examination of what they are saying in this setting can offer a clearer perspective on what’s going on here at home.

David Snyder of the American Insurance Association (AIA) wrote an article which was published in the December 2007 issue of Progres, a scholarly insurance journal from the International Association for the Study of Insurance Economics in Geneva, Switzerland. The two concluding paragraphs from the article are instructive. The first asserts that the National Insurance Act is “aimed at…the unique powers of state insurance regulators.” It also says that these powers politicize “what should be marketplace decisions.” Here is the excerpt (our emphasis added):

“This proposal [National Insurance Act] is aimed at the inefficiencies of the sub-national regulation and the unique powers of state insurance regulators to politicize what should be marketplace decisions. Under the proposal, both U.S. and foreign companies could operate under a more efficient regulatory system and one more in tune with global regulatory practices. Unfortunately, the industry in the U.S. has split over the issue and the NAIC, state regulators and their allies are fighting even this optional, pro-competitive approach, delaying its enactment."

Then in the concluding paragraph, we get a glimpse of OFC advocates’ overall strategy, which is to create pressure on several fronts, to 1) enact an OFC; 2) support adoption of “principles-based” regulation in New York State; 3) use the Treasury Department’s review of financial regulation to advance federal insurance regulation.  Here is the excerpt:

"This legislation [National Insurance Act], the continuing Congressional hearings on the U.S. regulatory system, some state efforts such as New York's review of financial services regulations, and the Treasury's regulatory efficiency initiative, are helping to create a growing awareness of the need for regulatory reform and greater efficiency. The debate cannot but help U.S. and foreign insurers, as well as their customers."

What It Means to Agents:  This quick review of what some advocates of federal insurance regulation are saying in the foreign press is particularly enlightening. What it confirms is that because so much money is at stake, the effort to attack our system of state insurance regulation is quite sophisticated. By looking at all that is being done and then “connecting the dots,” we see that the ultimate goal is not simply the enactment of a so-called “optional” federal charter, but the federalization of all insurance regulation.

PIA will continue to oppose efforts to undermine state insurance regulation and impose federal insurance regulation. Such a change, if allowed to succeed, would destabilize the insurance marketplace to the detriment of domestic American insurance carriers, Main Street insurance agents and insurance consumers whose choices would be severely limited under such a system.

OFC Supporters Suffer Setbacks

February 12, 2008