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Royce & Bean Admit Their Bill Would Be "Onerous" to Some Insurers

The prime sponsors of the National Insurance Act of 2009 (H.R. 1880) have admitted that their legislation would impose an onerous burden on some insurers...
June 2, 2009

The prime sponsors of the National Insurance Act of 2009 (H.R. 1880) have admitted that their legislation would impose an onerous burden on some insurers - those who opt for federal regulation, but then try to go back to the state system.

Reps. Ed Royce (R-Calif.) and Melissa Bean (D-Ill.), in a letter they wrote to the New York Times objecting to the newspaper's editorial calling for the defeat of their bill, attempted to answer the paper's assertion that allowing carriers to opt for state or federal regulation would lead to "regulator shopping."

Not so, say Royce and Bean. "Our legislation lays out an onerous process for any insurance company trying to switch its charter back to the state system. The national regulator's approval would be required first, after a thorough review," they wrote.

What It Means to Agents:  In their attempt to counter concerns of "regulator shopping," Reps. Royce and Bean admitted that their bill is weighted heavily toward federalization and is not really "optional" at all. They erect a high hurdle for carriers who try federal regulation and want to go back to state regulation - but apparently don't impose the same "onerous" process on state-chartered carriers who want to go federal. This illustrates that H.R. 1880 is not intended to provide for a truly "optional" federal charter. It is written specifically to make it difficult for carriers to return to the state-based system, if they so choose. In other words, it's like getting caught in quicksand. Carriers beware.

Letter to the Editor by Reps. Royce & Bean (New York Times 5/28/09)

NY Times Editorial Opposing OFC (New York Times 5/20/09)