On January 13, 2017, the United States and the European Union (EU) concluded negotiations on the first insurance covered agreement after this novel multilateral international agreement, envisioned and promoted by the National Association of Insurance Commissioners (“NAIC”) and the U.S. state insurance regulators who are its members, was authorized by Title V of the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203, signed by the President and effective in July 2010) (the “Act”).
The complete title of the document is the Bilateral Agreement Between the European Union and the United States of America On Prudential Measures Regarding Insurance and Reinsurance (the “Covered Agreement”).
One of the principal goals of the Covered Agreement is to affirm the authority of the Federal Insurance Office (“FIO”), also established by the Act within the United States Department of the Treasury, to preempt state laws that are inconsistent with the Covered Agreement and may result in less favorable treatment for foreign insurers. Such preemption, however, may not apply to any state insurance measure that “governs any insurer’s rates, premiums, underwriting, or sales practices.” Although the FIO and the United States Trade Representative (“USTR”) must consult with Congress on the negotiations, the Act does not require specific authorization or approval from Congress for the covered agreement to take effect.
FIO’s function is primarily designed to gather information, monitor trends in the insurance industry, and provide advice to the industry. While the FIO has no regulatory authority per se, it represents the United States in international negotiations with respect to insurance regulation and has a seat on the executive committee of the International Association of Insurance Supervisors.
The U.S.-EU Covered Agreement was submitted to the House Committees on “Financial Services” and “Ways and Means,” as well as the Senate Committees on “Banking, Housing, and Urban Affairs” and “Finance” on January 13, 2017 and subsequently both held subcommittee hearings on the Covered Agreement. A 90-day congressional waiting period mandated in the Act has concluded but, to date, the United States has not officially signed the Covered Agreement. The EU’s European Council authorized the signing of the Covered Agreement and asked for the European Parliament’s consent to adopt it as official policy.
Although the Trump Administration has not indicated whether it favors or disfavors the Covered Agreement, it has alternatively signaled its intention to repeal and replace major portions of Dodd-Frank as a part of its financial services deregulatory push, in particular with respect to the provisions of Dodd-Frank that affect banking, but also insurance to a lesser degree.
Less than nine years after the Wall Street meltdown, on June 8, 2017, the House of Representatives voted to pass H.R.10 – 115th Congress (2017-2018): the Financial Choice Act of 2017 (the “Choice Act”). While the Choice Act is widely viewed to be “dead on arrival” in the Senate, some parts of the legislation may end up surviving. The bill’s architect, Rep. Jeb Hensarling (R-TX), claimed that it will “end bailouts once and for all” because the legislation would take away the post-crisis powers granted to federal authorities to help them deal with a financial emergency like Lehman Brothers, AIG and parts of the U.S. auto industry.
A portion of the Choice Act, known as Orderly Liquidation Authority, allows regulators to resolve a failing financial firm. It is similar to how the FDIC handles failing banks. Conservatives argue that these emergency powers in Dodd-Frank have made “Too Big To Fail” a permanent policy by implying the federal government will always be ready to bail out financial institutions that, through their own risky behavior, find themselves in existential danger.
For the full article, refer to page 15 in the Fall 2017 issue. https://www.airroc.org/assets/docs/matters/AIRROC-Matters-Fall-2017-vol-13-No-2.pdf