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Is TRIA an engine for life insurers?

THE LIFE INSURANCE INDUSTRY should pay dose attention to Senate action on renewal of the Terrorism Risk Insurance Act (TRIA), whose authorization runs out Dec. 31. The Senate Banking Committee is expected to deal with the issue in the next several weeks.

It shouldn't take a rocket scientist to realize that life insurance interests, as well as some members of Congress with close ties to the industry, are maneuvering to use Senate action on reauthorization of TRIA as a vehicle to pursue their own agendas.

First, both members of Congress and the National Association of Insurance Commissioners (NAIC) are making no secret that they want to re-establish the states as primary insurance regulators, both in shaping international regulatory standards and reducing the voice of the Federal Insurance Office and the Federal Reserve Board in insurance regulatory affairs.

TRIA reauthorization legislation, as the likely only remaining vehicle Congress will have to deal with insurance issues, is seen as the ideal vehicle to rework the so-called Collins Amendment, not only directly, but also by adding language limiting the authority of the Fed and the Federal Insurance Office to oversee insurance that revisits federal powers granted through the Dodd-Frank Act (DFA).

The second is using TRIA reauthorization legislation to re-establish the National Association of Registered Agents and Brokers (NARAB). That has already passed both the Senate and the House with broad support.

The Senate passed it Jan. 30 as an attachment to its version reversing an ill-fated flood insurance rate hike bill first passed in 2012. The House has passed it with broad, bipartisan support several times in the last several Congresses. As a result, lobbyists see adding NARAB to the TRIA bill an "easy lift."

Conservative Flouse members are joining NAIC officials in arguing that DFA reforms were not subjected to a cost-benefit analysis before they were enacted, they question the need to globalize a holding company capital standard, and they fear that a potential requirement for state insurance regulators to use such a standard would hurt U.S. insurers and consumers.

NAIC officials also contend that federal regulators are likely to subject large insurance holding companies designated as systemically significant --as well as insurance companies that own thrifts--to adopt a uniform bank capital framework in its regulation of insurance companies, which NAIC CEO Ben Nelson argues could encourage, rather than discourage, these companies to take greater risks.

Analysts expect Collins to also propose --through her legislation--provisions aimed at creating a larger role for the NAIC in providing input for new insurance regulations. Industry officials believe that the likely early May action of the Senate Banking Committee will see "everyone trying to attach everything to TRIA as it's the last and only insurance thing Congress will do for quite a while," as noted by one lobbyist for a life insurance company.

Another lobbyist says "Congress hasn't done that on anything in Dodd-Frank from a statutory standpoint, even if it had the support of the world." They note that attacking the Obama administration for DFA is one thing, but taking steps to narrow DFA in the wake of the American International Group debacle is another thing. They also point out that there was strong support for some federal oversight of insurance even in the Bush and Reagan administration.

Several lobbyists say that the insurance industry is not united on reducing the current federal role in insurance. They caution that lessening the clout of the federal government, which has the sole statutory authority to negotiate trade agreements with foreign governments, may also give members of Congress pause.

An insurance analyst who asked not to be identified also noted that he has been told by life insurers that, "Yes, reopening anything in Dodd-Frank isn't easy. But there's a convergence on the Collins Amendment --everybody in the industry agrees with it; and it was her amendment to Dodd-Frank, after all, that is being interpreted to the detriment of the industry."

Arthur D. Postal

Washington Bureau Chief

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Author:Postal, Arthur D.
Publication:National Underwriter Life & Health
Date:May 1, 2014
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