The Financial CHOICE Act 2.0 released by Rep. Jeb Hensarling (R-Texas) on April 19, 2017 (“Act”) would have a significant impact on the extent to which the federal government regulates insurance. First and foremost, the Act would repeal the Federal Insurance Office and replace it with a bureau of the Department of the Treasury (“Treasury”) known as the Office of the Independent Insurance Advocate (“IIA”). The Act expressly states that the IIA and Treasury do not have general regulatory authority over the business of insurance. Rather, the mission of the IIA is to “[a]ct as an independent advocate on behalf of the interests of United States policyholders on prudential aspects of insurance matters of importance, and to provide perspective on protecting their interests, separate and apart from any other Federal agency or State insurance regulator.”
Under the Act, the IIA will have broad authority, including the authority to coordinate federal efforts on prudential aspects of international insurance matters, including (i) representing the United States as appropriate in the International Association of Insurance Supervisors, (ii) consulting with the various states on insurance matters of national importance, (iii) assisting the Secretary of the Treasury in administering the Terrorism Insurance Program established pursuant to TRIA, and (iv) observing all aspects of the insurance industry. However, pursuant to the Act, the IIA’s mandate does not extend to (i) health insurance, as determined by the Secretary of the Treasury in coordination with the Secretary of HHS, (ii) long-term care insurance (“LTC”), except that LTC which is included with life or annuity insurance components, or (iii) crop insurance. Pursuant to the Act, the Secretary of Treasury will be prohibited from delaying or preventing the issuance of any rule or the promulgation of any regulation by the IIA, and may not intervene in any matter before the IIA, except as provided by law.
Pursuant to the Act, the IIA will serve as a member on the Financial Stability Oversight Council. In that capacity, the IIA will have the authority to consult with international insurance supervisors and financial stability counterparts; consult with the Board of Governors of the Federal Reserve System with respect to representing the US in the International Association of Insurance Supervisors; participate at the Financial Stability Board of The Group of Twenty; and participate within the US delegation to the Organization for Economic Cooperation and Development. Additionally, the IIA will have authority to preempt a state insurance measure to the extent that the IIA determines that the measure (i) results in less favorable treatment of a non-US insurer domiciled abroad that is subject to a covered agreement than a US insurer domiciled, licensed or otherwise admitted in that state, and (ii) is inconsistent with a covered agreement. Finally, the IIA must appear before certain congressional committees for semi-annual hearings. Such hearings will generally concern activities of the IIA, any actions taken by the IIA relating to preemption pursuant to covered agreements, the state of the insurance industry generally, the US and global insurance and reinsurance markets, and any other matters deemed relevant by the IIA or requested by the committees.