Congress can best ensure a vibrant insurance marketplace by exercising strong oversight over federal and international intrusions into the state-based system of insurance regulation and by shifting federal disaster policy to reduce the risk to communities across the country.
In testimony submitted to the House Financial Services Subcommittee on Housing and Insurance for a hearing today titled “The Impact of Domestic Regulatory Standards on the U.S. Insurance Market” NAMIC outlined several areas of concern for members of the panel, specifically noting work done by federal agencies at home and abroad.
“The property/casualty insurance industry is unique among the financial services industry, and we appreciate the committee taking an interest in how it can help ensure the market is functioning optimally,” said Jimi Grande, senior vice president of federal and political affairs at NAMIC. “Despite natural disasters and man-made financial crises, the insurance industry has remained highly competitive and financially secure. The sustainability and resiliency of our industry stems from the regulatory system in place, the unique nature of how insurers work to spread risk, and the industry's conservative business model.”
In recent years, however, Grande noted that insurers and the state-based regulatory structure have seen increased intrusions by federal agencies created by the Dodd-Frank Act, such as the Financial Stability Oversight Council and the Federal Insurance Office, or through new authority it gave the Federal Reserve. Whether the opaque designation process for systemically important financial institutions, burdensome regulations, needless and costly data calls, or the negotiation of international insurance standards that threaten to undermine the U.S. regulatory system, Grande said Congress should ensure that federal agencies aren’t weakening the insurance marketplace for companies and consumers.
“These agencies were created and their powers granted by Congress, and we’re urging Congress to make sure that those powers are being used responsibly,” Grande said.
Additionally, Grande said that Congress could have a significant positive impact for insurers and the communities they serve by better protecting Americans from natural catastrophes. Legislation to incentivize the states to adopt stronger building codes or to encourage homeowners to take action to strengthen their homes has been introduced and should be adopted, he added.
“Federal disaster declarations and disaster spending aid have skyrocketed in recent years,” Grande said, noting that the average annual number of major disaster declarations has nearly tripled over the past 30 years and the cost of severe weather events is growing rapidly. “As the cost of storms continues to grow so does the federal government’s exposure – and ultimately the taxpayers’,” Grand noted. “Additionally, much of the money allocated for disaster relief is done through off-budget disaster appropriations with little accountability or transparency. Instead of waiting for disaster to strike, Congress could save lives, and potentially billions of dollars, by preparing before disaster strikes.”
While involving different aspects of federal policy, Grande said that the ultimate goal for lawmakers when it comes to natural disasters or financial regulation should be to prevent problems before they occur.
“Through strong oversight of federal agencies or by helping our communities better protect themselves from severe weather, Congress can best help ensure a strong insurance marketplace by reducing the risks to insurers and their policyholders,” Grande said.
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