The National Association of Mutual Insurance Companies recently said that Congress should use its oversight capabilities to prevent the expansion of federal agencies established by the law.
Charles M. Chamness, the president and CEO of NAMIC, testified before the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity that Dodd-Frank has altered the way insurance companies deal with regulations. The Federal Reserve, he said, was assigned the new responsibility of overseeing bank-holding insurance companies, a task with which it is unfamiliar.
“The Federal Reserve must recognize the distinct regulatory approaches required to properly supervise banks and insurance companies which entail different measure for capital, financial strength and stability,” Chamness said. “One size does not fit all and the system for supervision should be tailored to this economic reality.”
Additionally, Chamness said that while the Volcker Rule does exempt insurers, without the final rule, uncertainty remains as to whether some insurers will be able to invest in certain private equity funds.
“Allowing insurers to continue in their normal ownership of interest in securities is essential to appropriately engage in effective, long-term investment strategies and avoid costly premium increases for policyholders,” Chamness said.
Chamness also said that while Dodd-Frank did leave the insurance regulatory system relatively untouched, the legislation established numerous federal agencies that could complicate and add to the industry’s regulatory burden.
“It is clear that the property/casualty insurance industry plays a key role in the economy and every effort should be made to ensure that its markets are functioning,” Chamness said. “As we move forward, we would urge Congress to rectify and unintended consequences that are inevitable in any legislative initiative of this size and scope. The focus should remain on preventing unneeded and damaging interference in a well-functioning system.”