By Silla Brush - 05/03/10 11:27 PM EDT
Sen. Jeff Merkley (D-Ore.) is leading an effort to ensure state insurance regulators keep strong powers under Wall Street overhaul legislation
Buried in the 1,400-page bill to revamp the financial regulatory system is a provision to create a new Office of National Insurance to monitor insurers at the federal level.
The amendment would give more power for Congress to consult on international insurance agreements, said Julie Edwards, Merkley’s spokeswoman. The House reached a similar agreement last year before passing the Wall Street overhaul in December.
“State laws protecting their citizens shouldn’t be voided in order to give special treatment to foreign companies, and this amendment will make sure they won’t be,” Edwards said.
Consumer Watchdog, U.S. PIRG (Public Interest Research Group), Public Citizen and the powerful National Association of Insurance Commissioners (NAIC) are backing Merkley’s amendment and calling on senators to change the Dodd bill. A spokeswoman for Dodd did not respond to a request for comment.
“We don’t believe that a provision which would in effect deregulate state insurance protections should be part of the regulatory package,” said Carmen Balber, of Consumer Watchdog.
“This issue is critical to state insurance regulators as the Department of the Treasury under the bill would, for the first time, have the power to make determinations on the pre-emption of state insurance matters,” the insurance commissioners association wrote to Merkley.
The issue has divided the insurance industry ever since President Barack Obama laid out his overhaul plan last year and included a new federal office to monitor insurers. The debate mirrors a long-running split in the industry between companies that favor greater federal oversight and those that support the current system of state-based rules.
Benjamin McKay, senior vice president at the Property Casualty Insurers Association of America, said his group supports the amendment because it would give needed protection for state regulators.
Supporters of federal oversight of the industry say the Merkley amendment would limit the government’s ability to oversee an industry that includes major multinational companies that insure risk in many countries.
Blain Rethmeier, spokesman at the American Insurance Association, said: “The U.S. needs a strong national voice on insurance matters. We believe the Merkley amendment would strip the U.S. of that power.”
The American Council of Life Insurers supports the Dodd language.