A U.S.House subcommittee head has introduced long-awaitedlegislation that would give primacy to state insurance regulators inadopting any international insurance supervisory standards and allow congressionaloversight of any international standard-setting, including the ability to rejectproposed standards.
The billis called the Transparent Insurance Standards Act of 2016 and was introduced April29 by U.S. House Financial Services Housing and Insurance Subcommittee ChairmanBlaine Luetkemeyer, R-Mo. The legislation would ensure that state-based capitalstandards and perspectives are recognized and incorporated in any domestic or globalinsurance capital standard, according to the text.
The legislationtargets the various levels of insurance capital standards under development by the International Association of Insurance Supervisors. The U.S.would not be able to enter into any final international insurance standard or standardsunless the heads of the Board of Governors of the Federal Reserve System, the U.S.Treasury Department and state insurance commissioners have published these proposedstandards for public comment periods. There would also be a 90-day period of congressionalreview of the proposed standard during which Congress could kill the internationalinsurance standard proposal. The language in the bill says Congress can take actionto "approve or reject" a final standard.
The Fedand Treasury would have to make certain that any international standards would notchange state laws. Moreover, the Fed and Treasury would have to reach "consensuspositions" with state insurance commissioners in their discussions on insuranceissues before the IAIS, the Financial Stability Board or any other internationalforum, the bill states. The bill tries to assure that any international standards willfirst serve to protect insurance company policyholders, reflecting long-stated NAICvalues.
"UnitedStates officials participating in discussions or negotiations regarding internationalinsurance standards shall support standards designed for the protection of policyholders,"the bill says.
The legislationseeks to prevent any standards that are "bank-centric in nature." Rather,international insurance standards should take a principles-based approach usingrisk-based capital requirements, according to the language in the bill.
The PropertyCasualty Insurers Association of America is supporting the legislation, it saidin a news release. However, there is concern among some insurers that the legislationmight not go far enough in keeping state insurance regulation protected from interferenceby federal or international supervisory organizations, according to some industryplayers.
"Weencourage members of Congress to come together to finalize this bill swiftly andsend it to the President's desk," Nat Wienecke, federal government relationssenior vice president for PCI, said in the release. "The voice of the primarystate regulators and the NAIC would strengthen the U.S. in negotiations throughbetter coordination and will increase the transparency and accountability of internationalstandard setting and the U.S. role in it."
The NAICsaid it is still reviewing the bill. The Treasury did not immediately offer anycomment on the legislation, and the Fed declined to comment.