Senate Banking Committee staff indicated today that they want to give federal regulators oversight power on systemically important insurance companies but are grappling with how to construct such a role without interfering with the state-based system that oversees property-casualty carriers.
Industry groups were called today to meet with the staff of Banking Chairman Christopher Dodd and Sens. Mark Warner, D-Va., and Bob Corker, R-Tenn., as they craft language to allow federal regulators to take over at-risk firms, unwind them and put them out of business.
Those present said that staff was clear that insurance companies would fall under a new monitoring system designed to prevent a firm's failure from triggering another financial collapse. "They don't want leave a gap in the Fed's power in insurance," one lobbyist noted.
Industry would like to be excluded from the systemic-risk monitoring, but both a Dodd discussion draft and House-passed legislation would include carriers in the mix for the new oversight, along with major banks, securities firms, private equity groups and hedge funds. One attendee said that staff appeared to realize the significant role that the states play with their oversight and did not want to significantly interfere with it.
The industry is united in opposing any effort for carriers to pay into a fund to dissolve failed firms, arguing that they already pay into state guarantee funds designed to handle dissolution.
The House-passed bill would allow the resolution authority to take into account such state payments in its assessments on large firms to create a $150 billion fund to handle such takeovers. The Senate has been more resistant to creating a prefunding mechanism.