A panel of the House Financial Services Committee (FSC) today reported out legislation to the full committee that would significantly restrict the ability of federal regulators to get financial information from insurance companies.
The bill, H.R. 3559, the Insurance Data Protection Act of 2011 was sponsored by Steve Stivers (R-Ohio) and was approved along party lines. The vote was 7-5, with Republicans supporting it and Democrats opposing it.
The bill was taken up by the Subcommittee on Insurance, Housing and Community Development Committee.
It is unclear when it will be reviewed and voted on by the full FSC.
Rep. Luis Guttierrez (D-Ill.), ranking minority member, objected most vociferously to the legislation.
He said it was an industry-written bill, and protested the provisions stripping the Federal Insurance Office (FIO) of its subpoena powers.
Rep. Michael Capuano (D-Mass.) also opposed the legislation “for now.” His concern was with the provision that required federal agencies to comply with the Paperwork Reduction Act in collecting financial information from insurers.
Stivers said he would work with Guttierrez and Capuano “as much as possible” to deal with their concerns before the bill is taken up by the full committee. “We’re not trying to roll anyone over,” Stivers said.
He said the purpose of billis to make sure the FIO is not a regulator, but is merely an information-gathering entity and to make sure it is collected in the most efficient means possible.
The bill would revoke the authority of the FIO and the Office of Financial Research (OFR), two new entities created by the Dodd-Frank Act, to subpoena data from insurance companies.
The bill also would require the FIO, the OFR, the Financial Stability Oversight Council, and any other federal entity that seeks data about insurance companies to obtain that data through the insurance company's state regulator, another federal agency, or a public source.
As well as requiring federal entities and state regulators to maintain the confidentiality of nonpublic data obtained from or shared with other federal and state regulators.
R.J. Lehmann, deputy director of the Heartland Institute's Center on Finance, Insurance and Real Estate in Washington, was highly critical of the legislation.
He said it is understandable that insurers would want to avoid costly and duplicative data requests, but said DFA already strictly limits the FIO’s ability to collect data from insurers, and grants it the power to issue subpoenas only when it cannot gather information any other way.
Lehmann interprets the bill as saying the bill “would leave the office completely beholden to the states and the National Association of Insurance Commissioners for any and all information it might need.”
Lehmann said that, “could potentially compromise the office's charge to make recommendations to Congress on ways to improve and modernize the state-based system of insurance regulation.”
More troubling, Lehmann said, the bill would place new restrictions on the office's ability to share with other agencies or the general public any "non-publicly available" data that it receives.
He said that while Dodd-Frank already provides protections for confidential information, such as industry trade secrets, “handcuffing the FIO's ability to share even non-confidential data, such as insurers' statutory financial reports, goes against the office's central charge to disseminate information about insurance markets, as well as the requirements of the federal Freedom of Information Act and Dodd-Frank's goal of promoting transparency in financial markets.”
The panel, however, did not act on two other pieces of legislation sought by industry.
One would “explicitly and entirely” exclude insurance companies, including mutual insurance holding companies from the Federal Deposit Insurance Corporation’s “orderly liquidation authority” for troubled large non-banks.
The third would “preclude” the Federal Reserve from establishing higher prudential financial standards to troubled insurance companies it would oversee as ordered by the Financial Stability Oversight Council.
Both life and property casualty insurance trade groups thanked Rep. Judy Biggert (R-Ill.), chairman of the subcommittee, for her work on the bill.
Those sending the letter included the American Council of Life Insurers (ACLI), the American Insurance Association (AIA), the Financial Services Roundtable and the Reinsurance Association of America.
“We specifically commend you for supporting the confidentiality of insurance company data and protecting against overlapping data collection requirements,” which is addressed in the bill, the trade groups said in the letter.
Adam Noah, vice president for federal affairs for the AIA, voiced support.
He said the AIA appreciates the ongoing review of insurance provisions contained within the Dodd-Frank Act and efforts to ensure that regulators do not overreach with duplicative and often conflicting regulations. AIA supports measures, including those contained in H.R. 3559, that aim to protect the confidentiality of insurance company data.
“We will continue to engage in the Dodd-Frank implementation process in an effort to preserve the U.S. insurance industry’s competitiveness at home and abroad,” he added.
The Independent Insurance Agents and Brokers of America (IIABA) also said it supported the legislation even though it did not directly impact independent agents.
Charles Symington, IIABA senior vice president of government affairs said that, “Though the legislation does not directly affect Big ‘I’ members, we see strong merit in any legislation that further limits the authority of these new federal offices.”
Symington said that under current law, both the FIO and the OFR are prohibited from collecting data from agents and brokers. Dodd-Frank did, however, allow both the FIO and the OFR to subpoena data from insurers even though this data is already collected by state insurance regulators and the law requires the state regulators to share the data with the federal entities.
“Very simply, the Federal Insurance Office was principally created to be an informational office, and the information that they need is already collected and readily available through state insurance regulators,” Symington said.
“It is important to the Big ‘I’ that both the FIO and OFR have no more authority than they absolutely need to complete their very limited, Congressionally mandated, duties, and we thank the Committee for their action today in this regard,” Symington said.