ABIA COMMENDS VOLCKER FOR RECOMMENDING AN OFC
September 25, 2009
ABIA COMMENDS VOLCKER FOR RECOMMENDING AN OPTIONAL FEDERAL CHARTER FOR INSURANCE Barney Frank vows to take up OFC in 2010 WASHINGTON- The American Bankers Insurance Association commended Paul Volcker, chairman of the Obama administration's Economic Recovery Advisory Board for urging Congress to consider establishing an optional federal insurance charter (OFC). An OFC would increase benefits to consumers, enhance the global competitiveness of the American insurance industry, and bring greater uniformity and effectiveness to the regulatory process. Speaking before the House Financial Services Committee Paul Volcker backed the call for creating an OFC and urged Congress to “go further” than the current proposals on the table which create an office of national insurance but stop short of an OFC. “I would hope this committee would look at the question of national charters for insurance companies and bring them under, at least the big ones, under a framework so that something like AIG with similar problems can’t arise in the future,” said Volcker. “I think they ought to be regulated in a consistent way.” Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee agreed with Volcker that the question of an OFC is a “very important one” and should be addressed. “On this committee’s agenda next year will be the question of an optional charter,” said Frank. Kevin McKechnie, executive director of ABIA explained that consensus behind an OFC has increasingly picked up steam following the failure of the current state by state regulatory system to act in preventing the problems at insurance giant AIG from becoming a systemic risk to the national economy. “Volcker’s testimony highlights the urgent need to have a national discussion that recognizes the value of this much needed reform,” said McKechnie. “This long overdue measure would create greater efficiency and help modernize the insurance regulatory system.” Under current law, insurance providers must follow differing—sometimes conflicting—regulations in each state in which they operate. Insurers face obstacles such as inconsistent regulations, barriers to innovation, conflicting agent licensing and education requirements, among others. All of these factors drive up the price of products and slow down innovation and delivery of new products to consumers. "To suggest that the states can appropriately police insurance companies with worldwide operations, when other nations are loudly suggesting a global systemic risk regulator, is naïve. Clearly, solvency is a federal question," said McKechnie. The ABIA was created in 2001 through the combination of the American Bankers Association Insurance Association and the Association of Banks-in-Insurance. ABIA is a separately chartered affiliate of the American Bankers Association and is the only Washington, D.C. based full-service association for bank-insurance interests. ABIA can be found on the Internet at http://www.theabia.com ###