ACLI Tries to Steer GAO Report Toward OFC

January 13, 2009

The Government Accountability Office (GAO) last week released a highly critical study of the current financial services regulatory structure and made recommendations for how it should be updated. Significantly, a draft of this report had initially not addressed insurance regulatory reform - until the American Council of Life Insurers (ACLI) criticized the draft. As a result of that prodding, the final GAO report noted that "harmonizing insurance regulation across states has been difficult," and that Congress could "consider the advantages and disadvantages of providing a federal charter option for insurance and creating a federal insurance regulatory entity."

The ACLI has been a strong advocate of optional federal charters.

"ACLI's effort to be sure that an OFC for insurance is included in the GAO report and brought to the attention of Congress throws all of us in this business 'under the bus,'" said PIA National Senior Vice President Patricia A. Borowski. "PIA appreciates the difficulties that the recent SEC decision to regulate indexed insurance annuity products as full-fledged securities creates for our life insurance industry, our own members included. However, with due respect, indexed life insurance annuities are only a small part of the total U.S. domestic insurance industry."

"As FDIC Chairman Sheila Bair has wisely noted, there is no intention to address insurance supervision in the upcoming regulatory reform package because the insurance industry is not in crisis," Borowski said. "American consumers, including PIA members, desperately need Congress to correct the many current deficiencies with federal oversight and enforcement in banking, securities and capital markets. These are areas in which federal regulators were thought to possess professional expertise, but now we know they got it all wrong. PIA is not willing to voluntarily put at further risk the stability of the insurance industry and the security that it provides to consumers and the U.S. economy by accepting an optional federal charter."

PIA opposes a federal takeover of insurance supervision. "This includes our concerns about proposed 'limited federal tools,' reforms that impose -- rather than solve -- legal conflicts and uncertainty affecting PIA members' day-to-day operations as they transact the business of insurance," Borowski added.

"PIA is working to counteract attempts by the advocates of federal insurance regulation to exploit our nation's current financial crisis by pushing for additional deregulation under the guise of reform," said PIA National Executive Vice President & CEO Leonard C. Brevik. "Congress needs to preserve what worked as it fixes what failed. State regulation of insurance has worked well."

http://m.pianet.com/issues-of-focus/modernization/2009/acli-tries-to-steer-gao-report-toward-ofc