The House Financial Services Subcommittee on Housing and Insurance recently launched an examination into the competitiveness of U.S. insurers as impacted by international regulatory standards. Chairman Blaine Luetkemeyer (R-MO) is leading the charge with the goal of introducing international insurance standards legislation in early summer.
A key goal of Luetkemeyer’s is to have industry consensus for the final outcome. The Committee held a hearing this week with witnesses representing a broad spectrum of the insurance industry. Groups represented included the National Association of Mutual Insurance Companies, the American Council of Life Insurers, and the Property Casualty Insurers Association of America. The witnesses agreed that the emerging forces of globalization call for the creation of international insurance standards. Additionally, Congressional action would play a clarifying role in enforcing any standards created. However, Carolyn Cobb of the American Council of Life Insurers made an important comment that “any standards developed at international organizations must be consistent with the U.S. system for insurance supervision,” and “must not disproportionately harm U.S. products approved and regulated by state insurance supervisors.”
Currently, the U.S. and the European Union are negotiating an agreement on reinsurance collateral. The U.S. objective is to gain equivalency on Solvency II for U.S. insurers with business in Europe. Chairman Luetkemeyer’s hope is that Congress could play a more active role than the one outlined in the Dodd-Frank Act to make sure any agreement reached by the negotiators is up to the high standards of both Congress and stakeholders. As it stands now, Congress would have 90 days to review a final agreement and if at the end of that time they choose to reject the agreement, they could enact legislation nullifying the agreement.
The stakeholders and Congress appear to agree having an active voice in the decision to implement a final agreement on this matter, or any other international insurance issue, is critical for a couple of reasons. The first, as hearing witnesses noted, is to protect American companies from undue harm caused by a weak agreement. Second, but equally important, is to best represent the American system abroad. As Chairman Luetkemeyer himself pointed out, “We need to be able to promote as well as defend.”
Please continue to check the blog for further updates as this legislation moves forward.