***LEGISLATIVE ALERT***

DATE: April 5, 2006
TO:NCOIL Legislators
FROM:Paul Donohue, NCOIL Director of State-Federal Affairs
RE:Optional Federal Charter Legislation Introduced in the U.S. Senate

Attached are

  • amodel resolutionopposing option federal charter legislation adopted by the NCOIL Executive Committee at its Spring Meeting
  • the Sununu-JohnsonNational Insurance Act
  • a April 5Insurance Journalarticleregarding introduction of the Optional Federal Charter Legislation
  • a April 5Insurance Networking Newsarticleon the OFC

MODEL RESOLUTION

The attached resolution, adopted during the NCOIL Spring Meeting in February, is for your legislatures to adopt in order to oppose any federal preemptive scheme, including an OFC, that threatens state insurance regulation.It is critical that your legislatures adopt this model resolution and forward it to your congressional counterparts.

OPTIONAL FEDERAL CHARTER BILL INTRODUCED

Sen. John Sununu (R-NH) and Sen. Tim Johnson (D-SD) today introduced theNational Insurance Act of 2006(NIA), S.2509. The 290-page bill seeks to establish a parallel, federal system of insurance regulation and supervision for insurers and insurance producers, similar to the dual banking system. Under the NIA, states would maintain responsibility of regulating only those insurers and producers licensed in their state.

THE BILL AUTHORIZES TWO TYPES OF INSURANCE COMPANIES

The NIA would authorize creation of an Office of National Insurance (ONI), operating out of the Department of the Treasury, to charter the two types of insurance companies, a National Life Company and a National Property and Casualty Company. A national insurance commissioner, appointed by the president, would run the ONI for a five-year term, subject to the consent and advice of the United States Senate.

NATIONAL INSURANCE AGENCIES

The NIA authorizes the licensing of National Insurance Agencies and the licensing of federal insurance producers. A National Agency would be authorized to sell insurance for any federally chartered or state licensed insurer. A federally licensed insurance producer (agents and brokers) could sell insurance in any State on behalf of any National Insurer or a State Insurer. Insurers licensed by the state would be free to convert to a national charter and national insurers would be free to convert to a state charter.

SURVIVING STATE LAWS

National Insurers and federally licensed insurance producers would still be subject to certain state laws, including state tax laws, state unclaimed property and escheat laws, state laws involving participation and assigned risk plans, and state laws that provide for compulsory coverage of workers compensation or motor vehicle insurance.

HEARINGS UPCOMING

Senator Sununu announced that the Senate would hold hearings later this spring on the proposed bill. Since the Senate will be out on a non-legislative break from April 8 to April 24, expect to see hearings set sometime in May.

GROUPS FOR AND AGAINST NIA

The American Insurance Association, the Risk & Insurance Management Society Inc., the Council of Insurance Agents & Brokers, and the American Council of Life Insurers support an optional federal charter. Groups strongly opposing the plan include the Property Casualty Insurers Association of America, the National Association of Mutual Insurance Companies, the Independent Insurance Agents and Brokers of America, and the National Association of Professional Insurance Agents.