Today, the Treasury Department released the Blueprint for a Modernized Financial Regulatory Structure with the goal of a stronger, modernized, more efficient regulatory structure that enhances the competitiveness of all United States financial services providers.
U.S. Senators Tim Johnson (D-SD) and John Sununu (R-NH), authors and sponsors of the National Insurance Act of 2007, were glad to see that the 218 page proposal from the Treasury Departments includes a discussion of insurance regulation and recommends the creation of an Optional Federal Charter.
“I look forward to reviewing all of the Treasury’s proposals for the modernization of the financial services regulatory agencies. The regulatory structures’ ability to deal with the current economic challenges are a real concern today for the financial services industry, and I commend Treasury’s efforts to take a look at all sectors of the financial services industry and their corresponding regulatory frameworks,” Johnson said.
“An Optional Federal Charter (OFC) will modernize the current inefficient insurance regulatory structure, while enhancing U.S. competitiveness in the global financial services economy, and I commend Secretary Paulson and his colleagues for taking a long-overdue step in this direction,” said Senator John Sununu, who introduced OFC legislation in 2006 and 2007 with Johnson. “Moreover, an OFC will benefit policyholders by providing greater product choice and availability and consistently enforced state-of-the-art consumer protections. I will continue to encourage my colleagues to hold hearings on this important legislation in the coming months."
In April of 2006, Senator Johnson and Senator Sununu began their call for insurance industry regulatory modernization when they introduced a bill to create an optional federal charter (OFC) for insurance regulation. On May 24, 2007, Senator Johnson and Senator Sununu reintroduced an updated version of the National Insurance Act of 2007.
“There is increasingly widespread consensus that the status quo for insurance regulation is unacceptable. America’s $5 trillion insuranceindustry operates in a global marketplace. The United States’ insurance industry, agents, brokers and consumers are currently hamstrung by a system of regulation that is redundant, inefficient, burdensome, complicated, and costly. It lacks any kind of uniform regulation, and has no federal insurance regulator to speak for the United States nationally or internationally. While the other financial services are rightly concerned about maintaining competitiveness internationally, the insurance system is so far behind that it is often ignored altogether on the international scene. The fragmented system currently in effect has no place in a modern economy,” Johnson continued.
Regarding the overall Blueprint, Sununu stated, “Effective and efficient regulation ensures safety, soundness, and confidence in financial service firms and our capital markets. Despite some modernization efforts during the past decade, America’s financial service regulations remain fragmented, and in many cases operate under structures designed in the 1930’s. The Federal Reserve should be given greater powers to address systemic risk within our largest financial institutions. The shear number of regulatory organizations should be reduced and areas of duplication and confusion need to be eliminated. During the past five years, I have helped to write and introduce legislation modernizing and strengthening regulation of government sponsored housing enterprises, such as Fannie Mae and Freddie Mac, and legislation establishing a modern optional federal charter for insurance. I’m pleased to see both of these concepts are highlighted in Secretary Paulson’s working paper.”
An Optional Federal Charter provides a choice for insurers to become chartered at the national level, enabling them to work under a uniform set of regulations and an effective federal regulator without undermining necessary and important consumer protections.
On June 27th, 2007, the U.S. Treasury Department announced that it was beginning the second stage of its capital markets competitiveness action plan. In July, Senator Johnson and Senator Sununu sent a letter to Treasury Secretary Paulson applauding the Treasury Department’s June 27th announcement.
In early October, the Treasury Department asked for public comment to assist the agency in its review of the regulatory structure for financial services as a part of this plan. In November, Senator Johnson submitted comments regarding insurance regulation to the Treasury Department for their Blueprint for a Modernized Financial Regulatory Structure.