Kanjorski Efforts Kept Most Groups On Board Insurance Plan

The role the federal government should play over regulating insurance matters — specifically property-and-casualty and life products — is the most contentious debate within the industry.

With that backdrop, House Financial Services Capital Markets Subcommittee Chairman Paul Kanjorski, D-Pa., has scored a significant victory: crafting legislation to expand the government’s reach, and retain the support of most groups in the typically fractious sector.

The measure, which will be marked up by Kanjorski’s subcommittee today, would create an Office of Insurance Information within the Treasury Department to provide advice and expertise on insurance regulation to the White House and Congress.

His success is attributed to a concerted outreach to competing interest groups: large carriers, mutual companies, agent groups and state regulators, who regulate both property-and-casualty and life products. Kanjorski avoided the bitter debate over a bill that would allow carriers to choose whether to continue to be regulated by states or opt for supervision by a new federal agency.

“Kanjorski’s done an excellent job of keeping the ideas and bill separate and has done so in a way that has remarkably produced, I think, industry unity even among those who would oppose optional federal charter or support optional federal charter,” said Stephen Zielezienski, general counsel for the American Insurance Association. The AIA supports an optional federal charter.

Sandy Praeger, president of the National Association of Insurance Commissioners, said the bill would likely garner the support of her group, which is adamantly opposed to an optional federal charter because it would usurp their authority.

The bill would allow the office to establish federal policy on international insurance matters, ensuring that state laws are consistent with international trade agreements. Praeger said her group wants to tighten language over what would be defined as an international agreement under the bill, so it is not too pre-emptive.

The proposed office would likely tackle state requirements that foreign reinsurers must post a 100 percent collateral equal to their policy claims.

In 2005, foreign reinsurers had about $120 billion posted in collateral, forcing them to pay about $500 million annually in transaction costs. New York moved last year to treat all reinsurers the same.
“We think it has been incumbent upon us to work in a good faith effort with Congressman Kanjorski because he has said over and over again that is not his intent [to create an optional federal charter] via the bill,” said Praeger, who heads the Kansas Department of Insurance. “We believe him. We have to take that risk and I think it is a measured risk.”

Kanjorski said he created the office to remove competitive disadvantages in an increasing global marketplace for insurance. “Regardless of whether or not the federal government directly regulates insurance, we must educate ourselves on insurance policy and build a knowledge base in the federal government on these matters,” Kanjorski said when he introduced the bill in April.