DATE: MAY 5, 2010

TO: NCOIL LEGISLATORS

FROM: SUSAN NOLAN

RE: PROPOSED MERKLEY AMENDMENT WOULD LIMIT ONI AUTHORITY

Late last week, Sen. Jeff Merkley (D-OR) circulated a draft amendment to S. 3217, the Restoring American Financial Stability Act of 2010, that would narrow the authority of a proposed Office of National Insurance (ONI)—which would be established under Title V of S. 3217. Sen. Merkley had not filed the amendment as of yesterday, but we understand that he hopes to bring it forward soon.

GENERAL

Sen. Merkley’s amendment would still create an ONI at the U.S. Treasury Department with authority to enter into international agreements and preempt state insurance laws and regulations, but would add additional hurdles to the agreement-making process, limit the scope of preemption, and strengthen state appeals processes, among other things.

The amendment would:

  • replace the broader term “international insurance agreements on prudential measures” with narrower “covered agreements”
  • provide criteria for “covered agreements,” including mutual recognition, protection of U.S. insurance consumers, promotion of financial system stability, and meeting the regulatory goals of the States
  • limit preemption to only those measures that “directly treats less favorably” non-US insurers, instead of the previous standard of laws that resulted “in less favorable treatment”
  • require the ONI Director to consider the effect of preemption on various factors before making a preemption determination
  • require the ONI to consult the USTR, Congressional Committees, and insurance commissioners before initiating negotiations, during negotiations, and before entering into agreements
  • clarify that the initiation/decision to enter into agreements shall be subject to notice and comment rulemaking under the Administrative Procedures Act
  • require the Secretary to post the final legal text of an agreement in the Federal Register and wait 90 calendar days before any agreement could enter into force

NCOIL POSITION

NCOIL has strongly opposed the creation of an ONI. We have argued that it would be an immediate first step toward federal insurance regulation and federal chartering. We have not taken a position on revisions that sought to improve/weaken the ONI—including those ultimately included in the House-passed legislation that are similar, in some cases, to the Merkley amendment. Members have argued that supporting various amendments could be construed as supporting the underlying proposal.

OTHER’S POSITIONS

  • NAIC supported the House-passed Federal Insurance Office (FIO). NAIC opposed the Senate ONI, as drafted, but is now supporting the Merkley amendment.
  • Public Citizen has not opposed the creation of a federal insurance office. They have pushed to limit its preemptive authorities and are supporting the Merkley amendment.
  • PIA has strongly opposed any/all versions of legislation to create an ONI/FIO.
  • ACLI supports the ONI, as drafted.

REFERENCE MATERIALS

The following information is available for your review

  • Merkley Pushes Insurance Office Curb (5/4 National Underwriter)
  • Merkley Backing a Push to Give States Strong Powers to Regulate Insurance (5/3 The Hill)
  • 4/29 NAIC Letter Supporting Merkley ONI Amendment (attached)
  • 4/29 Public Citizen Summary of Merkley Amendment (attached)

For more information contact Mike Humphreys at or at 202-220-3014.