ACLI Will Work With P-C Group To Harmonize Their Charter Proposals

But Rodger S. Lawson, president of the Downers Grove, Ill.-based Alliance of American Insurers, disagrees with AIAs support for federal chartering.

"We are disappointed with this shift in AIAs position, particularly since we have historically worked with them to improve the state regulatory system," he says. "We hope that this will not lead to a future abandonment of these efforts."

Lawson says the Alliance does not agree that the federal government will be a more benign regulator or that total federal preemption is obtainable.

"We believe that there would be additional political costs that are not clearly understood," Lawson says. "Once a majority of insurance companies fully realize the ramifications of this federal chartering initiative, we are confident that they will oppose it."

Maria Berthoud, vice president of federal affairs for the Alexandria, Va.-based Independent Insurance Agents of America, agrees. She says she is not surprised by the AIAs support for optional federal chartering. However, she says, those who work every day in the real world market recognize that this plan will not work.

Federal chartering may make sense on the life insurance side of the business, she says, because of the nature of life insurance products. But on the p-c side, she says, federal chartering is too complicated, cumbersome and bureaucratic.

Kathleen Sebelius, president of the National Association of Insurance Commissioners, says AIA has been a great partner to NAIC during the past 17 months in working on regulatory reform.

NAIC members recognize the need for change, Sebelius says, and have embarked on a national drive to bring greater uniformity, uniform application, efficiency and effectiveness to insurance regulation.

"Despite the AIAs action, our focus will not change nor will we yield our mission of safeguarding consumers across the country, knowing that they are and will continue to be well served by the states," says Sebelius, who is Kansas commissioner.

Under the AIA plan, federally chartered insurance companies would be freed from rate and form oversight. However, the industrys antitrust immunity would be eliminated for most ratemaking activities.

Federally chartered insurers would also be exempt from state licensing, solvency and market conduct laws.

Instead, an office called the Federal Insurance Chartering Director would be established within the Treasury Department with authority to establish capital and surplus requirements, take action against financially impaired companies, promulgate unfair claim and marketing practice standards, engage in market conduct examinations and levy fines.

Federally chartered insurers would still have to comply with state premium tax laws, pay all required state assessments and participate in state guaranty funds.

Leigh Ann Pusey, senior vice president of government affairs for AIA, says AIA decided to consider a federal role due to changes created by the Gramm-Leach-Bliley Financial Modernization Act, dynamics in the marketplace, and frustration with the current system.

AIA anticipates, she says, that as it pursues federal chartering on Capitol Hill, challenges will arise to try to impose Community Reinvestment Act and similar requirements on insurers.

AIA is prepared to fight these challenges, Pusey says, but there are no guarantees about the outcome, and there may well have to be trade-offs.

Reproduced from National Underwriter Life & Health/Financial Services Edition, August 6, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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