H. Rept. 115-1008 - FEDERAL INSURANCE OFFICE REFORM ACT OF 2018115th Congress (2017-2018)
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115th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 115-1008
======================================================================
FEDERAL INSURANCE OFFICE REFORM ACT OF 2018
_______
November 2, 2018.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Hensarling, from the Committee on Financial Services, submitted the
following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 3861]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 3861) to reform the Federal Insurance Office of
the Department of the Treasury, and for other purposes, having
considered the same, report favorably thereon with an amendment
and recommend that the bill as amended do pass.
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Federal Insurance Office Reform Act of
2018''.
SEC. 2. REFORM OF FEDERAL INSURANCE OFFICE.
(a) In General.--Section 313 of title 31, United States Code, is
amended as follows:
(1) Leadership.--In the first sentence of subsection (b), by
inserting before the period at the end the following: ``after
consultation with State insurance commissioners''.
(2) Functions.--In subsection (c)(1)--
(A) in subparagraph (E), by striking ``to
coordinate'' and all that follows through ``United
States'' and inserting the following: ``to coordinate
Federal efforts, and to coordinate with the States, in
developing Federal policy on prudential aspects of
international insurance matters, including representing
the Federal Government'';
(B) in subparagraph (F), by striking ``to determine''
and inserting ``to assist the Secretary in
determining''; and
(C) by striking subparagraph (G) and inserting the
following:
``(G) to consult and work toward consensus with the
States (including State insurance regulators) on
matters of international importance; and''.
(3) Gathering of information.--In subsection (e)--
(A) in paragraph (1)--
(i) in the matter preceding subparagraph (A),
by striking ``may--'' and inserting ``may enter
into information-sharing agreements.''; and
(ii) by striking subparagraphs (A) through
(D);
(B) by striking paragraphs (2), (3), (4), and (6);
and
(C) by redesignating paragraph (5) as paragraph (2).
(4) Preemption of state insurance measures.--In subsection
(f), by striking ``Director'' each place such term appears and
inserting ``Secretary''.
(5) Consultation.--In subsection (i)--
(A) by striking ``to the extent the Director
determines appropriate,''; and
(B) by inserting before the period at the end the
following: ``and shall seek to include in such
meetings, State insurance commissioners, or at the
option of the State insurance commissioners, designees
acting at the direction of the State insurance
commissioners, throughout the negotiations of a covered
agreement''.
(6) Retention of existing state regulatory authority.--In
subsection (k), by inserting before the period at the end the
following: ``or with the authority to participate in a
supervisory college or similar regulatory process''.
(7) Repeal of certain reports requirements.--By striking
subsections (o) and (p) and redesignating subsections (q)
through (s) as subsections (o) through (q), respectively.
(8) Definition.--In subsection (p)(2), as so redesignated by
paragraph (7)--
(A) in subparagraph (A), by striking ``and'' at the
end;
(B) in subparagraph (B), by striking the period at
the end and inserting ``; and''; and
(C) by adding at the end the following new
subparagraph:
``(C) does not include new prudential requirements
for United States insurers.''.
(b) Conforming Amendment.--Subparagraph (E) of section 313(c)(1) of
title 31, United States Code, is amended by striking ``subsection (r)''
and inserting ``subsection (p)''.
SEC. 3. TREATMENT OF TERRORISM RISK INSURANCE ACT.
This Act and the amendments made by this Act may not be construed to
affect any responsibilities, duties, or authorities of the Secretary of
the Treasury under the Terrorism Risk Insurance Act of 2002 (15 U.S.C.
6701 note).
Purpose and Summary
On September 28, 2017, Representative Sean Duffy introduced
H.R. 3861, the ``Federal Insurance Office Reform Act of 2017'',
which would streamline the operations of the Federal Insurance
Office (FIO), within the U.S. Department of the Treasury
(Treasury), eliminate duplicative duties performed by state
insurance regulators and re-focus the FIO's mission on the
coordination between state insurance regulators and the federal
government on issues of international importance.
As amended, H.R. 3861 eliminates FIO's subpoena authority,
and general authority, to collect information directly from
insurers, eliminates the authority of FIO to study and issue
reports, unless requested by Congress, eliminates the Treasury
Department's authority to assign new duties or authorities to
the FIO, and clarifies that neither FIO nor the Treasury
Department has the authority to participate in supervisory
colleges. To improve the coordination of issues of
international importance, the legislation requires the FIO to
work towards consensus with the states about international
matters. The legislation also directs FIO to seek to include
state insurance commissioners in meetings throughout the
negotiation of covered agreements with international bodies,
and defines that a covered agreement shall not include new
prudential requirements.
Background and Need for Legislation
The goal of H.R. 3861 is to: (1) streamline the Federal
Insurance Office (FIO) by eliminating duplicative duties
performed by state insurance regulators and (2) focus the
office's mission on the coordination between state insurance
regulators and the federal government on issues of
international importance.
For nearly 150 years, the states have primarily regulated
U.S. insurance companies of every kind--including property-
casualty, life, reinsurance, health, and auto--have been
regulated primarily by the states. Congress and the states have
occasionally reviewed the effectiveness of the state-based
regulation of insurance and coordinated efforts to achieve
greater regulatory uniformity. In 1945, Congress passed the
McCarran-Ferguson Act (15 U.S.C. Sec. Sec. 1011 et seq.), which
confirmed the states' regulatory authority over insurance
except where a federal law expressly provides otherwise.
Title V of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Pub. L. No. 111-203) enlarged the federal
government's role in the insurance industry by creating a
federal office specifically tasked with insurance matters.
Title V does not give the federal government a role in
licensing or regulating the insurance industry in the United
States. Title V of the Dodd-Frank Act did establish a Federal
Insurance Office (FIO) at the Treasury Department and charged
the FIO director with representing the interests of U.S.
insurers during the negotiation of international agreements and
advising the Office of the U.S. Trade Representative (USTR)
during trade negotiations. The Subcommittee on Housing and
Insurance received testimony on October 24, 2017 from Paul
Ehlert, President of Germania Insurance and Chairman of the
National Association of Mutual Insurance Companies, who noted,
``the legislation moves the office under the Treasury
Department's Office of International Affairs. This will help
keep the mission focused on coordinating federal efforts and
representing the U.S. market, insurers, and policyholders
abroad rather than attempting to regulate the insurance
industry here at home.''
The FIO's authority extends to all lines of insurance
except health insurance, most long-term care insurance, and
crop insurance. The Treasury Secretary has general rulemaking
authority to implement the Federal Insurance Office and the
Office has access to personnel and other resources of the
Treasury available to the Treasury Secretary. Title V of the
Dodd-Frank Act charges FIO with eight specific mandates: (1)
monitoring all aspects of the insurance industry; (2)
monitoring the extent to which underserved communities have
access to affordable insurance; (3) making recommendations to
the FSOC on insurance companies to be designated for heightened
prudential standards and supervision by the Federal Reserve
because of their size or interconnectedness; (4) assisting the
Treasury Secretary in administering the Terrorism Risk
Insurance Act (TRIA); (5) coordinating federal involvement and
policymaking on international insurance matters, which includes
representing the U.S. on the International Association of
Insurance Supervisors (IAIS)--an international insurance
standard-setting body--and in negotiations of international
insurance agreements; (6) consulting with state insurance
regulators on matters of national or international importance;
(7) determining whether state insurance laws that treat non-
U.S. insurers less favorably than U.S. insurers are preempted
by international agreements; and (8) other duties assigned by
the Secretary of the Treasury.
There has been some concern, since the enactment of the
Dodd-Frank Act, that FIO is not a unified voice on matters of
insurance regulation. This lack of a cohesive voice also
impacts FIO's ability to successfully advocate on behalf of the
U.S. insurance business and the U.S. insurance regulatory
structure. H.R. 3861 seeks to rectify this lack of a cohesive
voice. Katharine L. Wade, Commissioner, Connecticut Insurance
Department, testified that, ``By making clear that FIO
represents the Treasury Department and is responsible for
coordinating federal agencies' international insurance
policymaking, the legislation provides clear lines of
demarcation and definition to the role of FIO internationally
and domestically.''
Hearings
The Committee on Financial Services, Subcommittee on
Housing and Insurance, held a hearing examining matters
relating to H.R. 3861 on October 24, 2017.
Committee Consideration
The Committee on Financial Services met in open session on
June 7, 2018, and ordered H.R. 3861 to be reported favorably to
the House AS AMENDED by a recorded vote of 36 yeas to 21 nays
(Record vote no. FC-184), a quorum being present. Before the
motion to report was offered, the Committee adopted an
amendment in the nature of a substitute offered by Mr. Duffy by
voice vote.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. The
sole recorded vote was on a motion by Chairman Hensarling to
report the bill favorably to the House as amended. The motion
was agreed to by a recorded vote of 36 yeas to 21 nays (Record
vote no. FC-184), a quorum being present.
{GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Congressional Budget Office Estimates
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 25, 2018.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3861, the Federal
Insurance Office Reform Act of 2017.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Matthew
Pickford.
Sincerely,
Keith Hall,
Director.
Enclosure.
H.R. 3861--Federal Insurance Office Reform Act of 2017
H.R. 3861 would amend the duties of the Federal Insurance
Office (FIO) within the Department of the Treasury to focus on
international insurance markets and improving coordination with
state insurance authorities and federal agencies. FIO's work
plans already address those matters; consequently, CBO
estimates that implementing this bill would have no significant
effect on the office's operations or administrative costs.
Enacting H.R. 3861 would not affect direct spending or
revenues; therefore, pay-as-you-go procedures do not apply.
CBO estimates that enacting H.R. 3861 would not increase
net direct spending or on-budget deficits in any of the four
consecutive 10-year periods beginning in 2029.
H.R. 3861 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Matthew
Pickford. The estimate was reviewed by H. Samuel Papenfuss,
Deputy Assistant Director for Budget Analysis.
Federal Mandates Statement
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995.
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of the section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
Disclosure of Directed Rulemaking
Pursuant to section 3(i) of H. Res. 5, (115th Congress),
the following statement is made concerning directed rule
makings: The Committee estimates that the bill requires no
directed rule makings within the meaning of such section.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This section cites H.R. 3861 as the ``Federal Insurance
Office Reform Act of 2017.''
Section 2. Reform of Federal Insurance Office
The section instructs the Treasury Secretary to consult
with state insurance commissioners on the appointment of the
Director of the FIO.
It further eliminates the authority of the Director to
determine whether State insurance measures are preempted by
covered agreements and places that authority with the Treasury
Secretary and instructs the FIO to work towards consensus with
states regarding insurance matters of international importance.
The section also allows FIO to enter into information
sharing agreements and eliminates the authority of FIO to
subpoena data directly from the insurance industry. It
eliminates authority of the FIO to issue reports not requested
by Congress and eliminates subpoena authority given to the FIO.
Conforming language strikes ``Director'' and inserts
``Secretary'' to determine whether State insurance measures are
preempted by covered agreements. The section further instructs
the Director to seek inclusion of state insurance commissioners
in meetings throughout negotiations of a covered agreement.
Finally, section 2 clarifies that the FIO or Treasury does
not have authority to participate in supervisory colleges,
eliminates reports from statute that have already been issued
and defines that a covered agreement shall not include new
prudential requirements.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
TITLE 31, UNITED STATES CODE
* * * * * * *
SUBTITLE I--GENERAL
* * * * * * *
CHAPTER 3--DEPARTMENT OF THE TREASURY
* * * * * * *
SUBCHAPTER I--ORGANIZATION
* * * * * * *
Sec. 313. Federal Insurance Office
(a) Establishment.--There is established within the
Department of the Treasury the Federal Insurance Office.
(b) Leadership.--The Office shall be headed by a Director,
who shall be appointed by the Secretary of the Treasury after
consultation with State insurance commissioners. The position
of Director shall be a career reserved position in the Senior
Executive Service, as that position is defined under section
3132 of title 5, United States Code.
(c) Functions.--
(1) Authority pursuant to direction of Secretary.--
The Office, pursuant to the direction of the Secretary,
shall have the authority--
(A) to monitor all aspects of the insurance
industry, including identifying issues or gaps
in the regulation of insurers that could
contribute to a systemic crisis in the
insurance industry or the United States
financial system;
(B) to monitor the extent to which
traditionally underserved communities and
consumers, minorities (as such term is defined
in section 1204(c) of the Financial
Institutions Reform, Recovery, and Enforcement
Act of 1989 (12 U.S.C. 1811 note)), and low-
and moderate-income persons have access to
affordable insurance products regarding all
lines of insurance, except health insurance;
(C) to recommend to the Financial Stability
Oversight Council that it designate an insurer,
including the affiliates of such insurer, as an
entity subject to regulation as a nonbank
financial company supervised by the Board of
Governors pursuant to title I of the Dodd-Frank
Wall Street Reform and Consumer Protection Act;
(D) to assist the Secretary in administering
the Terrorism Insurance Program established in
the Department of the Treasury under the
Terrorism Risk Insurance Act of 2002 (15 U.S.C.
6701 note);
(E) [to coordinate Federal efforts and
develop Federal policy on prudential aspects of
international insurance matters, including
representing the United States] to coordinate
Federal efforts, and to coordinate with the
States, in developing Federal policy on
prudential aspects of international insurance
matters, including representing the Federal
Government, as appropriate, in the
International Association of Insurance
Supervisors (or a successor entity) and
assisting the Secretary in negotiating covered
agreements (as such term is defined in
[subsection (r)] subsection (p));
(F) [to determine] to assist the Secretary in
determining, in accordance with subsection (f),
whether State insurance measures are preempted
by covered agreements;
[(G) to consult with the States (including
State insurance regulators) regarding insurance
matters of national importance and prudential
insurance matters of international importance;
and]
(G) to consult and work toward consensus with
the States (including State insurance
regulators) on matters of international
importance; and
(H) to perform such other related duties and
authorities as may be assigned to the Office by
the Secretary.
(2) Advisory functions.--The Office shall advise the
Secretary on major domestic and prudential
international insurance policy issues.
(3) Advisory capacity on Council.--The Director shall
serve
in an advisory capacity on the Financial Stability Oversight
Council established under the Financial Stability Act of 2010.
(d) Scope.--The authority of the Office shall extend to all
lines of insurance except--
(1) health insurance, as determined by the Secretary
in coordination with the Secretary of Health and Human
Services based on section 2791 of the Public Health
Service Act (42 U.S.C. 300gg-91);
(2) long-term care insurance, except long-term care
insurance that is included with life or annuity
insurance components, as determined by the Secretary in
coordination with the Secretary of Health and Human
Services, and in the case of long-term care insurance
that is included with such components, the Secretary
shall coordinate with the Secretary of Health and Human
Services in performing the functions of the Office; and
(3) crop insurance, as established by the Federal
Crop Insurance Act (7 U.S.C. 1501 et seq.).
(e) Gathering of Information.--
(1) In general.--In carrying out the functions
required under subsection (c), the Office [may--] may
enter into information-sharing agreements.
[(A) receive and collect data and information
on and from the insurance industry and
insurers;
[(B) enter into information-sharing
agreements;
[(C) analyze and disseminate data and
information; and
[(D) issue reports regarding all lines of
insurance except health insurance.]
[(2) Collection of information from insurers and
affiliates.--
[(A) In general.--Except as provided in
paragraph (3), the Office may require an
insurer, or any affiliate of an insurer, to
submit such data or information as the Office
may reasonably require in carrying out the
functions described under subsection (c).
[(B) Rule of construction.--Notwithstanding
any other provision of this section, for
purposes of subparagraph (A), the term
``insurer'' means any entity that writes
insurance or reinsures risks and issues
contracts or policies in 1 or more States.
[(3) Exception for small insurers.--Paragraph (2)
shall not apply with respect to any insurer or
affiliate thereof that meets a minimum size threshold
that the Office may establish, whether by order or
rule.
[(4) Advance coordination.--Before collecting any
data or information under paragraph (2) from an
insurer, or affiliate of an insurer, the Office shall
coordinate with each relevant Federal agency and State
insurance regulator (or other relevant Federal or State
regulatory agency, if any, in the case of an affiliate
of an insurer) and any publicly available sources to
determine if the information to be collected is
available from, and may be obtained in a timely manner
by, such Federal agency or State insurance regulator,
individually or collectively, other regulatory agency,
or publicly available sources. If the Director
determines that such data or information is available,
and may be obtained in a timely manner, from such an
agency, regulator, regulatory agency, or source, the
Director shall obtain the data or information from such
agency, regulator, regulatory agency, or source. If the
Director determines that such data or information is
not so available, the Director may collect such data or
information from an insurer (or affiliate) only if the
Director complies with the requirements of subchapter I
of chapter 35 of title 44, United States Code (relating
to Federal information policy; commonly known as the
Paperwork Reduction Act), in collecting such data or
information. Notwithstanding any other provision of
law, each such relevant Federal agency and State
insurance regulator or other Federal or State
regulatory agency is authorized to provide to the
Office such data or information.]
[(5)] (2) Confidentiality.--
(A) Retention of privilege.--The submission
of any nonpublicly available data and
information to the Office under this subsection
shall not constitute a waiver of, or otherwise
affect, any privilege arising under Federal or
State law (including the rules of any Federal
or State court) to which the data or
information is otherwise subject.
(B) Continued application of prior
confidentiality agreements.--Any requirement
under Federal or State law to the extent
otherwise applicable, or any requirement
pursuant to a written agreement in effect
between the original source of any nonpublicly
available data or information and the source of
such data or information to the Office,
regarding the privacy or confidentiality of any
data or information in the possession of the
source to the Office, shall continue to apply
to such data or information after the data or
information has been provided pursuant to this
subsection to the Office.
(C) Information-sharing agreement.--Any data
or information obtained by the Office may be
made available to State insurance regulators,
individually or collectively, through an
information-sharing agreement that--
(i) shall comply with applicable
Federal law; and
(ii) shall not constitute a waiver
of, or otherwise affect, any privilege
under Federal or State law (including
the rules of any Federal or State
court) to which the data or information
is otherwise subject.
(D) Agency disclosure requirements.--Section
552 of title 5, United States Code, shall apply
to any data or information submitted to the
Office by an insurer or an affiliate of an
insurer.
[(6) Subpoenas and enforcement.--The Director shall
have the power to require by subpoena the production of
the data or information requested under paragraph (2),
but only upon a written finding by the Director that
such data or information is required to carry out the
functions described under subsection (c) and that the
Office has coordinated with such regulator or agency as
required under paragraph (4). Subpoenas shall bear the
signature of the Director and shall be served by any
person or class of persons designated by the Director
for that purpose. In the case of contumacy or failure
to obey a subpoena, the subpoena shall be enforceable
by order of any appropriate district court of the
United States. Any failure to obey the order of the
court may be punished by the court as a contempt of
court.]
(f) Preemption of State Insurance Measures.--
(1) Standard.--A State insurance measure shall be
preempted pursuant to this section or section 314 if,
and only to the extent that the [Director] Secretary
determines, in accordance with this subsection, that
the measure--
(A) results in less favorable treatment of a
non-United States insurer domiciled in a
foreign jurisdiction that is subject to a
covered agreement than a United States insurer
domiciled, licensed, or otherwise admitted in
that State; and
(B) is inconsistent with a covered agreement.
(2) Determination.--
(A) Notice of potential inconsistency.--
Before making any determination under paragraph
(1), the [Director] Secretary shall--
(i) notify and consult with the
appropriate State regarding any
potential inconsistency or preemption;
(ii) notify and consult with the
United States Trade Representative
regarding any potential inconsistency
or preemption;
(iii) cause to be published in the
Federal Register notice of the issue
regarding the potential inconsistency
or preemption, including a description
of each State insurance measure at
issue and any applicable covered
agreement;
(iv) provide interested parties a
reasonable opportunity to submit
written comments to the Office; and
(v) consider any comments received.
(B) Scope of review.--For purposes of this
subsection, any determination of the [Director]
Secretary regarding State insurance measures,
and any preemption under paragraph (1) as a
result of such determination, shall be limited
to the subject matter contained within the
covered agreement involved and shall achieve a
level of protection for insurance or
reinsurance consumers that is substantially
equivalent to the level of protection achieved
under State insurance or reinsurance
regulation.
(C) Notice of determination of
inconsistency.--Upon making any determination
under paragraph (1), the [Director] Secretary
shall--
(i) notify the appropriate State of
the determination and the extent of the
inconsistency;
(ii) establish a reasonable period of
time, which shall not be less than 30
days, before the determination shall
become effective; and
(iii) notify the Committees on
Financial Services and Ways and Means
of the House of Representatives and the
Committees on Banking, Housing, and
Urban Affairs and Finance of the
Senate.
(3) Notice of effectiveness.--Upon the conclusion of
the period referred to in paragraph (2)(C)(ii), if the
basis for such determination still exists, the
determination shall become effective and the [Director]
Secretary shall--
(A) cause to be published a notice in the
Federal Register that the preemption has become
effective, as well as the effective date; and
(B) notify the appropriate State.
(4) Limitation.--No State may enforce a State
insurance measure to the extent that such measure has
been preempted under this subsection.
(g) Applicability of Administrative Procedures Act.--
Determinations of inconsistency made pursuant to subsection
(f)(2) shall be subject to the applicable provisions of
subchapter II of chapter 5 of title 5, United States Code
(relating to administrative procedure), and chapter 7 of such
title (relating to judicial review), except that in any action
for judicial review of a determination of inconsistency, the
court shall determine the matter de novo.
(h) Regulations, Policies, and Procedures.--The Secretary may
issue orders, regulations, policies, and procedures to
implement this section.
(i) Consultation.--The Director shall consult with State
insurance regulators, individually or collectively, [to the
extent the Director determines appropriate,] in carrying out
the functions of the Office and shall seek to include in such
meetings, State insurance commissioners, or at the option of
the State insurance commissioners, designees acting at the
direction of the State insurance commissioners, throughout the
negotiations of a covered agreement.
(j) Savings Provisions.--Nothing in this section shall--
(1) preempt--
(A) any State insurance measure that governs
any insurer's rates, premiums, underwriting, or
sales practices;
(B) any State coverage requirements for
insurance;
(C) the application of the antitrust laws of
any State to the business of insurance; or
(D) any State insurance measure governing the
capital or solvency of an insurer, except to
the extent that such State insurance measure
results in less favorable treatment of a non-
United State insurer than a United States
insurer;
(2) be construed to alter, amend, or limit any
provision of
the Consumer Financial Protection Agency Act of 2010; or
(3) affect the preemption of any State insurance
measure
otherwise inconsistent with and preempted by Federal law.
(k) Retention of Existing State Regulatory Authority.--
Nothing in this section or section 314 shall be construed to
establish or provide the Office or the Department of the
Treasury with general supervisory or regulatory authority over
the business of insurance or with the authority to participate
in a supervisory college or similar regulatory process.
(l) Retention of Authority of Federal Financial Regulatory
Agencies.--Nothing in this section or section 314 shall be
construed to limit the authority of any Federal financial
regulatory agency, including the authority to develop and
coordinate policy, negotiate, and enter into agreements with
foreign governments, authorities, regulators, and multinational
regulatory committees and to preempt State measures to affect
uniformity with international regulatory agreements.
(m) Retention of Authority of United States Trade
Representative.--Nothing in this section or section 314 shall
be construed to affect the authority of the Office of the
United States Trade Representative pursuant to section 141 of
the Trade Act of 1974 (19 U.S.C. 2171) or any other provision
of law, including authority over the development and
coordination of United States international trade policy and
the administration of the United States trade agreements
program.
(n) Annual Reports to Congress.--
(1) Section 313(f) reports.--Beginning September 30,
2011, the Director shall submit a report on or before
September 30 of each calendar year to the President and
to the Committees on Financial Services and Ways and
Means of the House of Representatives and the
Committees on Banking, Housing, and Urban Affairs and
Finance of the Senate on any actions taken by the
Office pursuant to subsection (f) (regarding preemption
of inconsistent State insurance measures).
(2) Insurance industry.--Beginning September 30,
2011, the Director shall submit a report on or before
September 30 of each calendar year to the President and
to the Committee on Financial Services of the House of
Representatives and the Committee on Banking, Housing,
and Urban Affairs of the Senate on the insurance
industry and any other information as deemed relevant
by the Director or requested by such Committees.
[(o) Reports on U.S. and Global Reinsurance Market.--The
Director shall submit to the Committee on Financial Services of
the House of Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate--
[(1) a report received not later than September 30,
2012, describing the breadth and scope of the global
reinsurance market and the critical role such market
plays in supporting insurance in the United States; and
[(2) a report received not later than January 1,
2013, and updated not later than January 1, 2015,
describing the impact of part II of the Nonadmitted and
Reinsurance Reform Act of 2010 on the ability of State
regulators to access reinsurance information for
regulated companies in their jurisdictions.
[(p) Study and Report on Regulation of Insurance.--
[(1) In general.--Not later than 18 months after the
date of enactment of this section, the Director shall
conduct a study and submit a report to Congress on how
to modernize and improve the system of insurance
regulation in the United States.
[(2) Considerations.--The study and report required
under paragraph (1) shall be based on and guided by the
following considerations:
[(A) Systemic risk regulation with respect to
insurance.
[(B) Capital standards and the relationship
between capital allocation and liabilities,
including standards relating to liquidity and
duration risk.
[(C) Consumer protection for insurance
products and practices, including gaps in State
regulation.
[(D) The degree of national uniformity of
State insurance regulation.
[(E) The regulation of insurance companies
and affiliates on a consolidated basis.
[(F) International coordination of insurance
regulation.
[(3) Additional factors.--The study and report
required under paragraph (1) shall also examine the
following factors:
[(A) The costs and benefits of potential
Federal regulation of insurance across various
lines of insurance (except health insurance).
[(B) The feasibility of regulating only
certain lines of insurance at the Federal
level, while leaving other lines of insurance
to be regulated at the State level.
[(C) The ability of any potential Federal
regulation or Federal regulators to eliminate
or minimize regulatory arbitrage.
[(D) The impact that developments in the
regulation of insurance in foreign
jurisdictions might have on the potential
Federal regulation of insurance.
[(E) The ability of any potential Federal
regulation or Federal regulator to provide
robust consumer protection for policyholders.
[(F) The potential consequences of subjecting
insurance companies to a Federal resolution
authority, including the effects of any Federal
resolution authority--
[(i) on the operation of State
insurance guaranty fund systems,
including the loss of guaranty fund
coverage if an insurance company is
subject to a Federal resolution
authority;
[(ii) on policyholder protection,
including the loss of the priority
status of policyholder claims over
other unsecured general creditor
claims;
[(iii) in the case of life insurance
companies, on the loss of the special
status of separate account assets and
separate account liabilities; and
[(iv) on the international
competitiveness of insurance companies.
[(G) Such other factors as the Director
determines necessary or appropriate, consistent
with the principles set forth in paragraph (2).
[(4) Required recommendations.--The study and report
required under paragraph (1) shall also contain any
legislative, administrative, or regulatory
recommendations, as the Director determines
appropriate, to carry out or effectuate the findings
set forth in such report.
[(5) Consultation.--With respect to the study and
report required under paragraph (1), the Director shall
consult with the State insurance regulators, consumer
organizations, representatives of the insurance
industry and policyholders, and other organizations and
experts, as appropriate.]
[(q)] (o) Use of Existing Resources.--To carry out this
section, the Office may employ personnel, facilities, and any
other resource of the Department of the Treasury available to
the Secretary and the Secretary shall dedicate specific
personnel to the Office.
[(r)] (p) Definitions.--In this section and section 314, the
following definitions shall apply:
(1) Affiliate.--The term ``affiliate'' means, with
respect to an insurer, any person who controls, is
controlled by, or is under common control with the
insurer.
(2) Covered agreement.--The term ``covered
agreement'' means a written bilateral or multilateral
agreement regarding prudential measures with respect to
the business of insurance or reinsurance that--
(A) is entered into between the United States
and one or more foreign governments,
authorities, or regulatory entities; [and]
(B) relates to the recognition of prudential
measures with respect to the business of
insurance or reinsurance that achieves a level
of protection for insurance or reinsurance
consumers that is substantially equivalent to
the level of protection achieved under State
insurance or reinsurance regulation[.]; and
(C) does not include new prudential
requirements for United States insurers.
(3) Insurer.--The term ``insurer'' means any person
engaged in the business of insurance, including
reinsurance.
(4) Federal financial regulatory agency.--The term
``Federal financial regulatory agency'' means the
Department of the Treasury, the Board of Governors of
the Federal Reserve System, the Office of the
Comptroller of the Currency, the Office of Thrift
Supervision, the Securities and Exchange Commission,
the Commodity Futures Trading Commission, the Federal
Deposit Insurance Corporation, the Federal Housing
Finance Agency, or the National Credit Union
Administration.
(5) Non-United States insurer.--The term ``non-United
States insurer'' means an insurer that is organized
under the laws of a jurisdiction other than a State,
but does not include any United States branch of such
an insurer.
(6) Office.--The term ``Office'' means the Federal
Insurance Office established by this section.
(7) State insurance measure.--The term ``State
insurance measure'' means any State law, regulation,
administrative ruling, bulletin, guideline, or practice
relating to or affecting prudential measures applicable
to insurance or reinsurance.
(8) State insurance regulator.--The term ``State
insurance regulator'' means any State regulatory
authority responsible for the supervision of insurers.
(9) Substantially equivalent to the level of
protection achieved.--The term ``substantially
equivalent to the level of protection achieved'' means
the prudential measures of a foreign government,
authority, or regulatory entity achieve a similar
outcome in consumer protection as the outcome achieved
under State insurance or reinsurance regulation.
(10) United States insurer.--The term ``United States
insurer'' means--
(A) an insurer that is organized under the
laws of a State; or
(B) a United States branch of a non-United
States insurer.
[(s)] (q) Authorization of Appropriations.--There are
authorized to be appropriated for the Office for each fiscal
year such sums as may be necessary.
* * * * * * *
MINORITY VIEWS
H.R. 3861 would make several changes to the authorities of
the Federal Insurance Office (FIO). Following the 2007-2009
financial crisis, and specifically after the near-collapse of
AIG, it became clear that although the state-based system of
regulating the insurance industry has its strengths, there were
significant gaps in oversight with regard to systemic risks
that insurance companies can pose. The Dodd-Frank Wall Street
Reform and Consumer Protection Act (Dodd-Frank) expanded the
federal role for insurance regulation by creating a new
supervisory and regulatory framework to examine insurance
companies both domestically and internationally for risks to
U.S. financial stability.
With these and other concerns about increasing coordination
on insurance matters in mind, FIO was created under Title V of
Dodd-Frank. Although not a regulator, FIO was designed to play
an important role in both domestic and international insurance
issues through monitoring, data collection, and leadership in
the coordination of the United States' efforts abroad.
Unfortunately, H.R. 3861 would repeal or otherwise weaken many
of FIO's authorities.
First, the bill eliminates FIO's authority to receive and
collect data on and from the insurance industry, including its
subpoena authority, as well as its ability to analyze and
disseminate data and information. The elimination of this
authority could have far reaching consequences, including
harmful impacts on the federal government's ability to respond
to terror attacks. Specifically, FIO is tasked with assisting
the Treasury Secretary in administering the Terrorism Risk
Insurance Program--a program created in the aftermath of the
September 11, 2001 terrorist attacks to enable communities to
better recover following a terrorist attack. FIO is also the
only entity with the authority to subpoena the insurance
industry for data necessary to meet the requirements of the
Terrorism Risk Insurance Act (TRIA). By repealing the subpoena
authority and all of FIO's data collection authorities, the
federal government's response to terrorism under TRIA could be
seriously hampered. Furthermore, FIO is tasked with monitoring
the extent to which traditionally underserved communities and
consumers, minorities and low- and moderate-income persons have
access to affordable insurance products. This important
responsibility is impossible to successfully implement without
FIO's data collection tools. FIO has never used its subpoena
authority, but its power to collect data is critical to its
functions.
Second, the bill would significantly weaken FIO's authority
to negotiate agreements internationally by: (1) revising its
authority to only represent the interests of the Federal
Government rather than the United States as a whole, which is
its current role; (2) transferring FIO's role to make
preemption determinations to the Treasury Secretary; and (3)
stipulating that covered agreements negotiated by FIO cannot
include new prudential requirements for U.S. insurers. Taken
together, these changes severely weaken the U.S. position
internationally on international insurance matters, including
covered agreements.
Third, the bill places cumbersome consultation and
consensus requirements on FIO with regard to state involvement
by: (1) requiring the Secretary of Treasury to consult with
State insurance commissioners before appointing the Director of
FIO; (2) redefining FIO's role in coordinating international
insurance policy as including the goal of achieving consensus
with the States; and (3) requiring the Director of FIO to seek
to include state insurance commissioners or their designees
(the NAIC) in meetings throughout the negotiations of a covered
agreement. Although the requirements to reach consensus with
the States and ensure their participation in meetings are
aspirational rather than mandatory, it is unclear whether the
language addresses constitutional concerns raised by the
Department of Justice on a similar matter.
Democrats strongly support the existing state-based system
for insurance regulation. However, H.R. 3861 would harm our
domestic and international interests. For all these reasons, we
oppose H.R. 3861.
Maxine Waters.
William Lacy Clay.
Stephen F. Lynch.
Daniel T. Kildee.
Carolyn B. Maloney.
Al Green.
Michael E. Capuano.
[all]