DATE: JULY 26, 2007

TO: NCOIL LEGISLATORS

FROM: MIKE HUMPHREYS, NCOIL

RE:OPTIONAL FEDERAL CHARTER LEGISLATION INTRODUCED IN HOUSE

Attached, please find:

a July 25 BestWire article entitled Federal Insurance Charter Bill Debuts in U.S. House

a July 25 press release and bill summary from Representatives Melissa Bean (D-IL) and Ed Royce (R-CA)

Reps. Bean and Royce yesterday introduced the National Insurance Act of 2007 (NIA), a companion bill that industry sources say is nearly identical to S. 40—introduced by Sens. John Sununu (R-NH) and Tim Johnson (D-SD) in May. The bill, which is the first bipartisan optional federal charter (OFC) proposal to be introduced in the House, would establish a dual federal/state system of regulation and supervision for insurers and insurance producers.

INTRODUCTORY REMARKS

In introducing the legislation, Rep. Bean said, “Regulatory obstacles currently discourage insurance innovation and nimble product development to capitalize on emerging growth markets. Eliminating the need to coordinate with 51 state regulators and accelerating the time to market potential will foster greater industry innovation and agility.”

Rep. Royce added, “There is little argument that the current state-based regulatory system which oversees the insurance industry is outdated, burdensome, complicated, duplicative and costly.”

NEW PROVISIONS IN HOUSE BILL

Though the House bill, which is not yet numbered, is nearly identical to S. 40, there are a few minor differences, including:

the addition of a definition of “anti-fraud organization,” as “an organization whose purposes include investigation, prevention and detection of insurance-related crime and fraud…” and related provisions, including one regarding immunity from liability.

new requirements that a national property and casualty insurer provide the National Commissioner with copies of every standard policy form used by the company.

revisions to subsections that discuss minimum requirements for licensing of non-U.S. insurers.The House bill expands on language regarding the jurisdiction in which company may be organized or incorporated.

a requirement that the GAO review insurance sector competitiveness to analyze the efficiency of a dual charter system, and any efficiencies that may have been created for national insurers by such a system. The report would be made to the Senate Committee on Banking, Housing, and Urban Affairs, and the House Committee on Financial Services within three years of enactment.

Opponents/proponents

Opponents of an OFC include the Independent Insurance Agents & Brokers of America (“Big I”), Aflac, the National Association of Mutual Insurance Companies (NAMIC), and the Coalition Opposed to a Federal Insurance Regulator (COFIR), among others. Also opposed are various state-based organizations of public officials including the National Governors Association (NGA), National Conference of State Legislatures (NCSL), Council of State Governments (CSG), and the National Association of Insurance Commissioners (NAIC).

Proponents of the legislation include the American Council of Life Insurers (ACLI), the American Bankers Insurance Association (ABIA), the American Insurance Association (AIA), the Council of Insurance Agents and Brokers (CIAB), the Financial Services Forum, the Financial Services Roundtable, and the Reinsurance Association of America, among others.

NCOIL POSITION

NCOIL has strongly opposed the OFC concept on the basis that it would set-up a bifurcated regulatory system that would not serve the interests of consumers. At the NCOIL Summer Meeting last week, the NCOIL State-Federal Relations and Executive Committees voted unanimously to send a letter in opposition to S. 40 to Sens. Sununu and Johnson, as well as the Senate Committee on Banking, Housing, and Urban Affairs. The letter was distributed yesterday afternoon. We will continue to monitor OFC legislation and update you as appropriate.

More information on S. 40 is available on the NCOIL Web site at under NCOIL News/Reports. Please feel free to contact me by return e-mail or at 518-687-0178 should you have any questions.