The financial services regulatory reform measure passed by Congress yesterday, which contains parts of more than 25 different bills, includes a provision on international insurance regulation that is being met with cheers by the insurance industry.
This bill, which rolls back some of the measures of the Dodd-Frank law, includes bipartisan language on international insurance capital standards proposed by Senators Dean Heller (R-Nev.) and Jon Tester (D-Mont.) that insurers say will promote increased transparency in international insurance discussions and require U.S. negotiators to support consensus positions with state regulators in international negotiations on insurance standards.
It’s the first time Congress has offered guidance on international regulation of insurance, according to the National Association of Mutual Insurance Companies (NAMIC).
“The outcomes of these international discussions have tremendous potential to harm consumers and competitive markets in the U.S.,” said Jimi Grande, senior vice president for government affairs at NAMIC. “Today’s vote will help bring needed transparency and an increasing reliance on the expertise of state insurance regulators in these discussions.”
The trade group Property Casualty Insurers Association of America (PCI) said the legislation will “reinforce the primacy of the state regulation of insurance and require that U.S. federal representatives coordinate with state insurance regulators and speak with one voice in international forums.”
The insurance provision is part of the larger reform measure, the Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155), that eases banking regulations imposed after the financial crisis by the Dodd-Frank law. The House of Representatives voted 258-159 to pass the measure that the Senate previously approved in March by a 67-31 vote. The bill now goes to President Donald Trump, who has indicated he will sign it.
Section 211 of the S.2155 says that Treasury, the Federal Reserve System and the Federal Insurance Office “shall support increasing transparency at any global insurance or international standard-setting regulatory or supervisory forum” and if they intend to take any position on a global insurance regulatory proposal they “shall achieve consensus positions” with state insurance regulators through the National Association of Insurance Commissioners, when they are in negotiations on insurance issues before the International Association of Insurance Supervisors, Financial Stability Board, or any other international forum of financial regulators.
According to NAMIC’s Grande, the insurance provision will allow Congress to know whether new international standards are based on a “dangerous over-reliance on uniformity” or whether they respect different regulatory systems including the state-based system in the U.S.
NAMIC: More Steps Needed
NAMIC would actually like Congress to go even further.
“We are pleased with this critical first step of increased transparency, but Congress should also mandate any international standards be consistent with state and federal laws so they are not allowed to undermine state insurance regulation,” Grande said.
The insurance industry may have additional opportunities to see its concerns met as Congress is likely to tackle additional financial regulatory reforms in the near future.
One focus will be H.R. 4537, a bill introduced by Reps. Sean Duffy (R-Wis.) and Denny Heck (D-Wash.). This bill would prohibit any U.S. negotiators from supporting or agreeing to any international regulatory pacts or standards that are inconsistent with U.S. federal and state insurance laws and regulations, including proposals developed by the International Association of Insurance Supervisors.
Following the House passage of S. 2155, House Financial Chair Jeb Hensarling (R-Tex.) called the regulatory rollback of some of the Dodd-Frank provisions “the most significant pro-growth financial regulatory reform package since the passage of Gramm-Leach-Bliley nearly a generation ago.”
Hensarling said the reforms will free community banks to better serve consumers and local communities.
“For far too long, far too many people in our country have struggled to make ends meet. They’ve struggled to buy a car; they’ve struggled to buy a home; they’ve struggled for their version of the American Dream,” Hensarlng said.” Why is this happening? Because Main Street banks and credit unions that Americans depend on have been stifled by the weight, load, volume, complexity and cost of heavy Washington bureaucratic red tape which has prevented them from serving their communities. But today, that changes.”
Hensarling said he hopes both the House and Senate will consider an additional package of “bipartisan pro-growth capital formation provisions” soon.
Idaho Senator Mike Crapo (R-Idaho), chairman of the Senate Banking Committee, called the bill a “step toward right-sizing regulation” so that local banks and credit unions can focus more on lending.
“This is an important moment for small financial institutions, small businesses, and families across America,” Crapo said.
While some Democrats voted for the bill, most in the minority party opposed it, claiming that the bill guts many of the provisions put in place by the Dodd-Frank law enacted following the financial crisis that were intended to reduce the risks of bank failures and bailouts.
Rep. Maxine Waters (D-Calif), ranking member of the Financial Services committee, spoke for the minority party. “Republicans are trying to pass this bill off as an effort solely designed to benefit small community banks. But the truth is the bill is packed with poisonous provisions that benefit megabanks like Wells Fargo and companies like Equifax. It also weakens critical mortgage protections to ensure borrowers can afford their loans, and prevent discrimination and fraud,” Waters said.
Waters said the bill “weakens stress tests and capital requirements for big banks and undermines supervision of large foreign banks like Deutsche Bank.”
*This story ran previously in our sister publication Insurance Journal.