In response to the Bush Administration’s proposal to reform the financial regulatory system, NAPSLO is encouraging the U.S. House and Senate to complete work on the Nonadmitted and Reinsurance Reform Act of 2007 to improve the efficiency of the insurance industry before pursuing the federal approach proposed this morning.
Secretary of the Treasury Henry Paulson Jr. on Monday outlined the Bush Administration’s financial regulatory system overhaul and as part of the proposal recommended the establishment of an Optional Federal Charter (OFC) for the insurance industry, similar to the current dual-chartering banking system. The proposed new federal agency would be housed within the Treasury Department.
The proposals outlined this morning were designed to reform federal regulatory agencies and segments of a national regulatory structure that failed to perform adequately in recent years leading to the current economic crisis.
“State based insurance regulation has not been part of these regulatory failures,” said NAPSLO Executive Director Richard Bouhan. “In fact, the states have performed well in regulating insurance over the years and the state system would continue to exist with any Optional Federal Chartering framework Congress establishes.”
However, the state based regulatory process has inefficiencies that need to be addressed, Mr. Bouhan said and Congress should solve these problems immediately by enacting legislation that will direct and empower the states to establish a uniform and more efficient regulatory process. The NRRA, which NAPSLO believes would solve many of the inefficiency problems in the surplus lines industry, was passed unanimously in the House of Representatives (HR 1065) in June 2007 and a similar version (S 929) is currently in the Senate.
“Congress should enact the NRRA, now, before it discusses other changes in the current regulatory structure,” Mr. Bouhan said. “Passage of the NRRA would be a major step in creating a framework to eliminate duplication and inefficiency in the surplus lines and reinsurance segments of the insurance industry.”