Frank Keating, president and CEO of the American Council of Life Insurers (ACLI), issued the following statement in response to the White Paper released by the U.S. Treasury Department to reform financial services regulation in the United States:
Washington, D.C. (June 17, 2009) — “Treasury’s proposals to enhance oversight of the insurance sector of the nation’s economy will set us on the right path towards a modern, efficient and consumer-oriented regulatory system.
“The White Paper recognizes that the insurance industry is systemically important to the American people and the nation’s economy. As the White Paper notes, the insurance industry plays a central role in financial protection, retirement security and jobs creation in the United States.
“Moreover, the White Paper recognizes that the 135-year-old state regulatory system is riddled with inefficiencies, inconsistencies and unnecessary barriers to competitiveness that have not been alleviated despite sincere efforts by state regulators and the National Association of Insurance Commissioners (NAIC) to advance uniformity.
“Also important, the White Paper notes that insurance is a global enterprise, and the lack of a federal office with responsibility and expertise in insurance hampers our effectiveness in dealing with other nations on insurance-related concerns. As the White Paper notes, the U.S. is the only member of the International Association of Insurance Supervisors (IAIS) that does not have a federal office that can speak for our country with a single voice.
“ACLI therefore appreciates Treasury’s commitment to work towards modernization of insurance regulation based on the principles of national uniformity, efficiency, effective oversight of systemic risk and better international cooperation.
“The White Paper identifies a federal charter as one possible way to achieve those objectives. ACLI strongly supports an optional federal charter as the only way to achieve them.
“An optional federal charter will address all the concerns raised by the White Paper:
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It will benefit consumers by establishing strong national market conduct standards that will serve as a model for the nation.
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It will establish expertise in the federal government to monitor insurance-related systemic risk;
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It will assure national uniformity and regulatory efficiency for federally-chartered insurers;
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It will establish a federal office with the same stature as the Office of the Comptroller of the Currency to represent the American people in negotiations with regulators from other countries.
“The goals outlined by the White Paper cannot be achieved within the existing state-by-state regulatory system. There are significant constitutional issues regarding the ability of Congress to command states to implement federal laws. Moreover, without a federal insurance office, variations in state interpretation and application of these laws are bound to occur.
“We applaud Treasury’s proposal to create an Office of National Insurance as a first step towards eventual establishment of a federal functional insurance regulator that will directly regulate federally-chartered insurers.”
“A federal functional insurance regulator would regulate federally-chartered insurers comprehensively, with an eye towards the close connection between product-design and solvency. Any proposal to separate product regulation from solvency regulation risks undermining the safety and soundness of insurance companies. The best way to address concerns over products and solvency is through an optional federal charter.”
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The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association whose 340 member companies account for 93 percent of the life insurance industry’s total assets in the United States, 94 percent of life insurance premiums and 94 percent of annuity considerations. In addition to life insurance and annuities, ACLI member companies offer pensions, including 401(k)s, long-term care insurance, disability income insurance and other retirement and financial protection products, as well as reinsurance. ACLI's public Web site can be accessed at www.acli.com.