STATEMENT OF ADMINISTRATION POLICY
H.R. 5143 - Transparent Insurance Standards Act of 2016
(Rep. Luetkemeyer, R-MO, and 39 cosponsors)
The Administration strongly opposes H.R. 5143, the Transparent Insurance Standards Act of 2016.
This legislation would roll back critical Wall Street reforms intended
to protect American consumers and our financial system. The Dodd-Frank
Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act)
created important and necessary changes to regulatory authorities and
coordination for the insurance industry. H.R. 5143 would severely
weaken these reforms, which were put in place to enhance insurance
industry oversight in the wake of the 2008 financial crisis. The Nation
has made great progress as a result of the Dodd-Frank Act, and cannot
allow this bill to hamper the United States' ability to implement the
best standards for our unique regulatory regime. The restrictions that
this legislation seeks to place on United States representatives in
international insurance matters under H.R. 5143 would raise serious
constitutional concerns and severely outweigh any potential attendant
benefits.
Following the 2008
financial crisis, and specifically after the near-collapse of American
International Group, Inc. (AIG), the Dodd-Frank Act established a new
supervisory and regulatory framework to examine financial stability
risks in the insurance industry both domestically and internationally.
The Dodd-Frank Act created the Federal Insurance Office (FIO), which is
directed in part to "coordinate federal efforts and develop federal
policy on prudential aspects of international insurance matters,
including representing the United States, as appropriate, in the
International Association of Insurance Supervisors (IAIS) and assisting
the Secretary in negotiating covered agreements." The Dodd-Frank Act
also expanded the scope of the Federal Reserve's supervisory authority
so that it now serves as the consolidated supervisor of insurance
holding companies that own either a Federally chartered thrift or a
bank, as well as non-bank financial companies designated by the
Financial Stability Oversight Council (FSOC). FIO, the Federal Reserve,
and state insurance commissioners are all actively engaged at the IAIS
and regularly coordinate with one another, ensuring that each aspect of
the unique United States regulatory regime is adequately represented in
any international negotiation. Despite their effective coordination and
extensive work thus far to improve global insurance regulation, the
restrictions which H.R. 5143 seeks to impose would stop this work in its
tracks and would put in place cumbersome and counterproductive
requirements.
H.R. 5143 would purport to
prescribe strict negotiating objectives for United States
representatives in international fora regarding international insurance
standards, and establish several new processes and reporting
requirements to be completed before any standard could be agreed to.
These requirements would contravene the President's exclusive
constitutional authority to determine the time, scope, and objectives of
international negotiations. They also would add significant delays and
limitations to the process for developing an international insurance
capital standard, ultimately weakening the United States' ability to
negotiate effectively for standards that best accommodate our unique
regulatory regime.
Specifically, under H.R.
5143, FIO and the Federal Reserve would not be allowed to agree to
international insurance standards unless, among other things, such
standards are first published in the Federal Register and made available
for public comment for 30 days. If this prohibition applied to the
mere negotiation and conclusion of such agreements, it would violate the
President's exclusive constitutional authority to conduct international
negotiations. Even construed to avoid unconstitutional application,
this type of requirement would significantly impair U.S. interests at
both the IAIS and the Financial Stability Board (FSB) and limit the
ability of the United States to influence decisions made at the IAIS,
which could result in international insurance standards being adopted
that are not in the best interests of U.S. consumers, the U.S. insurance
industry, and the U.S. economy.
Furthermore, H.R. 5143
would require the Secretary of the Treasury and the United States Trade
Representative to "consult with and directly include State insurance
commissioners" in negotiation of written bilateral or multilateral
agreements regarding insurance or reinsurance. Although the President
may choose to permit such consultation and involvement, as has been done
already, the President's authority to determine who will represent the
United States in international negotiations is exclusive, and the
Congress may not dictate these choices for him.
Finally, the bill would
limit the amount available to the Securities and Exchange Commission
(SEC) through its mandatory Reserve Fund, established by the Dodd-Frank
Act. This cut to SEC resources is completely unrelated to international
insurance standards and would negatively impact the SEC's ability to
fund the long-term information technology initiatives that are necessary
to keep pace with industry's increasing use of new and
technologically-complex financial products and services.
Because this legislation
seeks to tie the hands of U.S. representatives, in an unconstitutional
manner, and prevent them from effectively negotiating on international
insurance matters, the Administration strongly opposes H.R. 5143.
If the President were presented with H.R. 5143, his senior advisors would recommend he veto the bill.
Source: Executive Office of the President, Office of Management and Budget
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