/PRNewswire/ -- Financial reform legislation must be amended to preserve states' ability to protect insurance consumers and bring the bill in line with White House comments yesterday targeting potential industry loopholes in financial reform, said Consumer Watchdog today.
White House Communications Director Dan Pfeiffer blogged a list of the '10 Most Wanted Lobbyist Loopholes' in the financial reform bill yesterday. He warned against efforts to exempt the insurance industry from new information collection requirements and notes that the bill does not change states' authority to regulate insurance. However language in the legislation currently under consideration in the Senate would grant the Treasury Department broad new authority to preempt state insurance laws and regulations on behalf of foreign insurance companies.
Pfeiffer wrote: "Insurance is regulated by the states, not the federal government - and this bill doesn't change that. But this bill would give the Treasury Department the ability to collect information from insurance companies so that it can help identify emerging risks before they blow up the financial system - like AIG."
Consumer advocates point to language in the main Senate proposal that would allow federal preemption of state insurance laws and are calling for an amendment to bring the bill in line with White House position on this issue.
"The Senate bill would allow Treasury to roll back strong state insurance protections on behalf of foreign insurance firms. It must be amended to meet White House assurances that state oversight of insurance will not be harmed. Insurance deregulation should not be the end result of the Senate's financial re-regulation package," said Carmen Balber, Washington Director for Consumer Watchdog.
An amendment offered by Senator Jeff Merkley (D-OR) and supported by Consumer Watchdog would narrow the broad scope of insurance preemption in the bill to help preserve state insurance regulation and give Congress and the states more input into insurance agreements negotiated by Treasury.
The current Senate provisions would allow Treasury to negotiate new insurance policy through international agreements and behind closed doors, with no input from Congress, state regulators or insurance consumers. Treasury need not consider states' regulatory goals, potential gaps in insurance regulation, or protect insurance consumers in negotiating such agreements. Agreements could then be used to preempt state insurance protections, including capital, solvency and other prudential laws, on behalf of foreign insurers. The states would have no authority to challenge unilateral preemption decisions by Treasury on the merits. Even state laws that treat all insurance companies equally could be subject to preemption. And the current language threatens to subject state insurance laws to preemption under deregulatory constraints contained in existing trade agreements.
"A Senate fix is necessary to preserve states' ability to protect insurance consumers," said Balber.
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