House panel set to revisit reach and powers of new federal insurance office

House lawmakers this week will attempt to alter legislation creating a new federal insurance office after lobbying interests clashed over its proposed powers.

The insurance industry is divided over whether the new office under the Treasury Department should negotiate international insurance agreements on prudential matters.

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The issue taps into a long-running split between insurers who favor the existing system of state laws and regulations and those who favor setting up a new federal power. Those who support the state-based system say a new office that could negotiate the agreements would infringe on state rights.

The House Financial Services Committee postponed a markup of legislation on the new Federal Insurance Office because of the opposition, but lawmakers are slated for another markup this week.

Staff on the Financial Services Committee and Ways and Means Committee, which has jurisdiction over the U.S. Trade Representative (USTR), have been trying to hash out the legislation. The issue sets up a regulatory turf question between the Treasury Department and USTR.

One option under discussion would be to let either the new office or the USTR reached an international agreement, but then require congressional ratification. The bill under debate does not require congressional approval.

That alternative would still raise a legal question of whether the congressional approval automatically pre-empts state regulations. But it would raise the bar and allow lobbying groups to attempt to influence congressional lawmakers to vote down the international agreement.

Committee staffers are also debating how to clarify the role of the USTR in negotiating international insurance agreements. The new insurance office could play a complementary role to the USTR.