Trade Associations React to AIA’s Support of Federal Chartering

The Alliance of American Insurers, the NAII and the NAMIC are among industry trade associations that have publicly reacted to the American Insurance Association’s (AIA) endorsement of an optional federal chartering plan for p/c insurers.

Alliance President Rodger S. Lawson said his group was disappointed with this shift in AIA’s position inasmuch as the two organizations have historically worked together to improve the state regulatory system. “We hope that this will not lead to a future abandonment of these efforts,” he said.

The AIA board of directors formally endorsed draft legislation that would allow p/c insurance companies to obtain a federal business charter. Although the AIA proposal is designed for primary p/c insurance companies, it could be expanded to include other types of insurers, agents and brokers, and reinsurers, said a statement from the AIA.

The legislative concepts approved by the board are wholly consistent with AIA’s previously released Guiding Principles for Regulatory Reform.

“This proposal fleshes out our collective vision of how an optional federal charter for insurers could look and work,” stated AIA President Robert E. Vagley. “We offer it as a template for policymakers working to create the optimal regulatory system for insurers, consumers, and regulators. To that end, we look forward to what we hope will be extensive dialogue with other industry groups and individual companies interested in advancing optional federal chartering.”

Vagley noted that the insurance operating environment has changed dramatically in the past few years. Technology and trade liberalization have produced a truly global market for insurance, as it has for other products and services, Vagley commented. In addition, enactment of the federal Gramm-Leach-Bliley Act means expanding competition among the banking, securities and insurance industries.

Lawson added that the Alliance and its member companies do not share the view that the federal government would be a more benign regulator or that total federal preemption is a reasonably obtainable objective. He said the Alliance believes there would be additional political costs that are not clearly understood. Lawson added that once a majority of insurance companies fully realize the ramifications of the federal chartering initiative, the Alliance is confident those companies will oppose it.

The Alliance remains a strong proponent of the concept of functional regulation as articulated in the Gramm-Leach-Bliley Act. Modernized state regulation is the best approach to serving the needs of insurers and consumers in a fair and balanced manner.

The National Association of Independent Insurers (NAII) outlined its position on the issue of state versus federal insurance regulation as follows:

• Supports state regulation of insurance;

• Understands that state regulation must improve and is actively working with state regulators and legislators to enact such improvements;

• Opposes federal encroachment into insurance regulation;

• Believes that Congress must give states ample time to improve state regulation;

• Is carefully studying other options, including the AIA proposal, with an open mind.

National Association of Mutual Insurance Companies (NAMIC) Vice President-Federal Affairs, Pamela J. Allen, released the following statement regarding the AIA’s proposal for an optional federal charter for property/casualty insurance companies:

“The release of the AIA proposal reflects the growing concern in the industry regarding the need to reform the existing state insurance regulatory system.

“NAMIC continues to support state regulation. NAMIC believes reform of the state system is necessary, deserves immediate action and should be based on principles of consumer protection, free enterprise, regulatory fairness and due process.”

Topics Carriers Legislation Property Casualty