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House Hearing on OFC Bill Focuses Mostly on Systemic Risk

While House Capital Markets Subcommittee Chairman Paul Kanjorski (D-Pa.) declared that federal regulation of insurance wasn't a matter of if, but how and in what...
May 19, 2009

While House Capital Markets Subcommittee Chairman Paul Kanjorski (D-Pa.) declared that federal regulation of insurance wasn't a matter of if, but how and in what form, there was no real consensus during a hearing last Thursday entitled "How Should the Federal Government Oversee Insurance?" The first in a series of hearings was ostensibly held on this year's version of an Optional Federal Charter bill, the National Insurance Consumer Protection Act (H.R. 1880) by Reps. Ed Royce (R-Calif.) and Melissa Bean (D-Ill.), but it focused mostly on the regulation of systemic risk.

Witnesses at the hearing were all academics: Baird Webel, Specialist in Financial Economics, Congressional Research Service; Patricia Guinn, Managing Director, Global Risk and Financial Services Business, Towers Perrin; Martin F. Grace, James F. Kemper Professor, Department of Risk Management and Insurance, Georgia State University; Scott Harrington, Alan B. Miller Professor, Wharton School, University of Pennsylvania; and our old friend J. Robert Hunter, Director of Insurance, Consumer Federation of America.

The three-hour hearing was sparsely attended by members of the subcommittee and there were few spectators. Reps. Royce and Bean were there, speaking in favor of their OFC bill. Rep. David Scott (D-Ga.) warned against a "radical overhaul" of the state-based insurance regulatory system, saying unnecessary interference could be potentially damaging to the industry and the economy.

Rep. Jackie Speier (D-Calif.), a strong advocate of state insurance regulation, called federal regulation "seriously misplaced and misguided." She also argued that AIG's failure was due to its investment in derivative transactions, which she said were regulated by the Office of Thrift Supervision. She said the OTS  "was largely asleep at the switch."

What It Means to Agents:  Regarding the future prospects of H.R. 1880, it should be noted that after it was introduced in April it was referred to not one, but three House committees. In addition to the Financial Services Committee, H.R. 1880 was also referred to the Committees on the Judiciary, and Energy and Commerce. Veteran Hill staffers have told PIA National's lobbyists that when a bill is referred to multiple committees, it's usually considered to be the "kiss of death" for the legislation.