April 22, 2010

The Honorable Harry Reid
Senate Majority Leader
United States Senate
Washington, D.C. 20510

The Honorable Mitch McConnell
Senate Minority Leader
United States Senate
Washington, D.C. 20510


Dear Senators Reid and McConnell:


We write on behalf of the National Conference of State Legislatures (NCSL) to express our concerns regarding S. 3217, the Restoring American Financial Stability Act of 2010.  While the need to address our nation’s financial regulatory system is warranted, we must inform you that we are opposed to several aspects of the legislation that would impede the states’ abilities to regulate the business of insurance.  We are particularly concerned with the creation of an Office of National Insurance (ONI) in the U.S. Treasury Department and the inclusion of insurance companies to an additional layer of regulation for systemic risk.

For more than 150 years, the states have proven that they can successfully and effectively protect consumers and ensure that promises made by insurers are kept.  As a different kind of financial service, insurance requires a different kind of regulation that the states are best suited to provide.  Despite the consistency in regulating insurance at the state level, the ONI would duplicate and interfere with and impose burdensome and unnecessary data requests on insurers through subpoena.  Furthermore, the ONI would preempt state solvency regulation through its unilateral power to enter into international insurance agreements, all to the detriment to the protection of insurance consumers and healthy insurance markets.  With this in mind, NCSL opposes adoption of Title V of S. 3217 in its current form.

NCSL is further opposed to a systemic risk component in S.3217 that would interfere with state solvency regulation and assessments that would unilaterally take money out of the insurance marketplace to pay for systemically significant financial firms.  Of the nearly 600 financial institutions who received money through TARP, only three were insurers.  This was largely due to the industry’s low concentration, low barriers to entry and policyholder and beneficiary protection through the state rehabilitation, insolvency and guaranty fund systems.  Thus, NCSL urges the United States Senate to exclude the insurance industry from federal systemic risk regulation, federal resolution authority and assessments to fund the resolution of systemically risky financial firms in S. 3217.

On behalf of our colleagues, we would prefer to work with you rather than having to oppose your efforts to ensure meaningful regulatory reform.  However, without the changes outlined above we will not be able to support any federal financial services regulation reform.  If you have questions about the positions taken by your state legislative colleagues, please contact Neal Osten, 202-624-8660 – neal.osten@ncsl.org or Jeff Hurley, 202-624-7753 – jeff.hurley@ncsl.org.

We appreciate this opportunity to express the concerns of state legislatures to both of you and your colleagues in the Senate.



Senator Don Balfour, Georgia
National Conference of State Legislatures

Representative Brian Patrick Kennedy, Rhode Island
Chair, NCSL Standing Committee on Communications, Financial Services and Interstate Commerce


cc. Members of the United States Senate