Senate Banking Committee Chair
Offers Proposed Financial Services Reform Legislation

Posted 12/10/2009
By Robert L. Redding Jr.

Sen. Chris Dodd, D-Conn., chairman of the U.S. Senate Banking, Housing and Urban Affairs Committee, has released a draft financial services reform bill to kick off the markup process for reform in the U.S. Senate. Other Democrats on the Banking Committee indicated support for the legislation. No Republicans have endorsed the draft to date. Sen. Richard Shelby, R-Ala., ranking minority member, has not released comments on the draft bill.

Although the legislation is 1,136 pages in length, it contains little reform related to the insurance industry. The insurer provisions are a small part of the discussion draft bill.

Dodd did include:

• A single bank regulator

• Consumer Financial Protection Agency - Creates an independent watchdog to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards and other financial products, while prohibiting hidden fees, abusive terms and deceptive practices.

• Agency for Financial Stability - An independent agency responsible for identifying, monitoring and addressing systemic risks posed by large, complex companies as well as products and activities that can spread risk across firms.

The closest to insurance regulation the bill gets is to establish a new Office of National Insurance at the U.S. Department of Treasury. The new agency would monitor the insurance industry, coordinate international insurance issues and require a study on new ways to modernize insurance regulation and provide Congress with recommendations.

The draft's intent as far as insurance regulation is spelled out in Section 313:

(k) Retention of Existing State Regulatory Authority - Nothing in this section or section 314 shall be construed to establish or provide the Office or the Department of the Treasury with general supervisory or regulatory authority over the business of insurance.

One important provision has to do with a requirement for an annual report to Congress. Not later than 18 months after the date of enactment, the director of the Office of National Insurance would conduct a study and submit a report to Congress on how to modernize and improve the system of insurance regulation in the states.

The study would consider the following:

• Systemic risk regulation with respect to insurance.

• Capital Standards.

• Consumer protection for insurance products and practices and gaps in state regulation.

• The degree of national uniformity of state insurance regulation.

• The regulation of insurance companies and affiliates on a consolidated basis.

• International coordination of insurance.

Finally, the draft legislation does address streamlining the regulation of surplus lines and reinsurance through state-based reforms.

But at the end of the day, the study and report to Congress may contain more for the collision industry's future than any other provisions of the bill. This legislation is perceived by many to be a first step toward the federal regulation of insurance - albeit a small step.

Although the financial services reform legislative process is far from over and most likely will extend into 2010, neither the House nor Senate committees appear ready to include the federal regulation of insurance. Reps. Melissa Bean, D-Ill., and Ed Royce, R-Calif., have been the strongest advocates for federal regulation and included property and casualty insurers in their legislation, H.R. 1880. Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, has begun the markup process for his financial services package but has not determined the outcome of any proposed provisions that would provide for the federal regulation of property and casualty insurers.

To view H.R. 1880 or send a letter to your member of Congress and senators in support of the federal regulation of property and casualty insurers, go to www.TakingtheHill.com.

Bob Redding is the Automotive Service Association's Washington, D.C., representative. He is a member of several federal and state advisory committees involved in the automotive industry. For more information about the legislative activities of ASA, visit www.TakingTheHill.com.