Rep. Paul Kanjorski (D-Penna.) has scheduled a June 10 hearing on his bill the Insurance Information Act of 2008 (H.R. 5840).

Kanjorski introduced H.R. 5840 by surprise, at the start of an April 16 hearing before his House Financial Services Capital Markets, Insurance and Government Sponsored Enterprises Subcommittee that had been called to encourage industry dialogue on regulatory reform proposals. PIA was among the groups testifying.

Unfortunately, the OII proposal is the first step toward federal insurance regulation. The two House sponsors of optional federal charter legislation, Reps. Ed Royce (R-Calif.) and Melissa Bean (D-Ill.), are also original sponsors of H.R. 5840. Both lawmakers cheered the introduction of H.R. 5840, with Rep. Royce saying it “would move us one step closer to an optional federal charter.”

In announcing the July 10 hearing on H.R. 5840, Rep. Kanjorski released revised language for the bill. PIA, the NAIC and others had objected to a provision regarding international insurance agreements that the bill as introduced would give the Treasury broad authority to preempt state regulation of insurance. The proposed revision would give the Treasury secretary the authority to stay a preemption of state regulation if an inconsistency is created with state oversight in an official international agreement entered into by the United States.

What It Means to Agents:  H.R. 5840 is the “camel’s nose under the tent” that is being used as the vehicle to enable creation of the initial federal insurance regulatory infrastructure that, once established, can be rapidly transformed into the office of a new federal insurance regulator. That is why PIA announced its opposition shortly after the bill was introduced.

The revision giving the Treasury Secretary the right to stay a preemption of state insurance regulation if he finds an inconsistency in international agreements will have no practical effect. That’s because Treasury negotiates those agreements to begin with. The Treasury Secretary would then be staying preemptions that he negotiated. And it gives to the Treasury Secretary the authority to determine what does and does not conflict with state law, preserving his ability to preempt anything he alone determines is not in conflict.

June 10, 2008