[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

                      INSURANCE OVERSIGHT: POLICY
                    IMPLICATIONS FOR U.S. CONSUMERS,
                          BUSINESSES, AND JOBS



                               BEFORE THE

                            SUBCOMMITTEE ON
                         INSURANCE, HOUSING AND
                         COMMUNITY OPPORTUNITY

                                 OF THE


                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION


                             JULY 28, 2011


       Printed for the use of the Committee on Financial Services

                           Serial No. 112-53

67-948                    WASHINGTON : 2011
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                   SPENCER BACHUS, Alabama, Chairman

JEB HENSARLING, Texas, Vice          BARNEY FRANK, Massachusetts, 
    Chairman                             Ranking Member
PETER T. KING, New York              MAXINE WATERS, California
EDWARD R. ROYCE, California          CAROLYN B. MALONEY, New York
FRANK D. LUCAS, Oklahoma             LUIS V. GUTIERREZ, Illinois
RON PAUL, Texas                      NYDIA M. VELAZQUEZ, New York
DONALD A. MANZULLO, Illinois         MELVIN L. WATT, North Carolina
WALTER B. JONES, North Carolina      GARY L. ACKERMAN, New York
JUDY BIGGERT, Illinois               BRAD SHERMAN, California
GARY G. MILLER, California           GREGORY W. MEEKS, New York
SCOTT GARRETT, New Jersey            RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas              WM. LACY CLAY, Missouri
JOHN CAMPBELL, California            JOE BACA, California
MICHELE BACHMANN, Minnesota          STEPHEN F. LYNCH, Massachusetts
THADDEUS G. McCOTTER, Michigan       BRAD MILLER, North Carolina
KEVIN McCARTHY, California           DAVID SCOTT, Georgia
STEVAN PEARCE, New Mexico            AL GREEN, Texas
BILL POSEY, Florida                  EMANUEL CLEAVER, Missouri
MICHAEL G. FITZPATRICK,              GWEN MOORE, Wisconsin
    Pennsylvania                     KEITH ELLISON, Minnesota
BILL HUIZENGA, Michigan              ANDRE CARSON, Indiana
SEAN P. DUFFY, Wisconsin             JAMES A. HIMES, Connecticut
NAN A. S. HAYWORTH, New York         GARY C. PETERS, Michigan
JAMES B. RENACCI, Ohio               JOHN C. CARNEY, Jr., Delaware
ROBERT J. DOLD, Illinois

                   Larry C. Lavender, Chief of Staff
      Subcommittee on Insurance, Housing and Community Opportunity

                    JUDY BIGGERT, Illinois, Chairman

ROBERT HURT, Virginia, Vice          LUIS V. GUTIERREZ, Illinois, 
    Chairman                             Ranking Member
GARY G. MILLER, California           MAXINE WATERS, California
SCOTT GARRETT, New Jersey            EMANUEL CLEAVER, Missouri
PATRICK T. McHENRY, North Carolina   WM. LACY CLAY, Missouri
LYNN A. WESTMORELAND, Georgia        MELVIN L. WATT, North Carolina
SEAN P. DUFFY, Wisconsin             BRAD SHERMAN, California
ROBERT J. DOLD, Illinois             MICHAEL E. CAPUANO, Massachusetts

                            C O N T E N T S

Hearing held on:
    July 28, 2011................................................     1
    July 28, 2011................................................    51

                        Thursday, July 28, 2011

Birnbaum, Birny, Executive Director, the Center for Economic 
  Justice........................................................    31
Furgatch, Andrew, Chairman and CEO, Magna Carta Companies, on 
  behalf of the Property Casualty Insurers Association of America 
  (PCI) and the National Association of Mutual Insurance 
  Companies (NAMIC)..............................................    35
Heaton, Letha, Vice President, Marketing, Admiral Insurance 
  Company, on behalf of the National Association of Professional 
  Surplus Lines Offices, Ltd.....................................    28
Huff, John M., Director, State of Missouri Department of 
  Insurance, Financial Institutions and Professional Registration     6
Hughes, Gary E., Executive Vice President & General Counsel, 
  American Council of Life Insurers (ACLI).......................    26
Jackson, Clay, CPCU, Senior Vice President and Regional Agency 
  Manager, BB&T Cooper, Love, Jackson, Thornton & Harwell, on 
  behalf of the Independent Insurance Agents and Brokers of 
  America (IIABA) and the Council of Insurance Agents & Brokers 
  (CIAB).........................................................    37
Pusey, Leigh Ann, President & CEO, American Insurance 
  Association, on behalf of the Financial Services Roundtable 
  (Roundtable) and the American Insurance Association (AIA)......    33
Smith, Eric, President and CEO, Swiss Re Americas, on behalf of 
  the Reinsurance Association of America (RAA)...................    38
Voss, Susan E., Commissioner, Iowa Insurance Division, and 
  President, National Association of Insurance Commissioners 
  (NAIC), on behalf of NAIC......................................     8
Wren, Hon. Greg, State Representative, Alabama House of 
  Representatives, and Treasurer, the National Conference of 
  Insurance Legislators (NCOIL), on behalf of NCOIL..............    10


Prepared statements:
    Birnbaum, Birny..............................................    52
    Furgatch, Andrew.............................................    60
    Heaton, Letha................................................    70
    Huff, John M.................................................   101
    Hughes, Gary E...............................................   108
    Jackson, Clay................................................   117
    Pusey, Leigh Ann.............................................   123
    Smith, Eric..................................................   136
    Voss, Susan E................................................   178
    Wren, Hon. Greg..............................................   192

              Additional Material Submitted for the Record

Biggert, Hon. Judy:
    Written statement of the Council of Insurance Agents & 
      Brokers....................................................   204
    Letter to Chairman Jo Ann Emerson and Ranking Member Jose 
      Serrano of the Subcommittee on Financial Services and 
      General Government of the Committee on Appropriations, 
      dated May 20, 2011.........................................   222
    Letter to Treasury Secretary Timothy Geithner, dated February 
      10, 2011...................................................   224
    Response from Treasury Secretary Timothy Geithner, dated 
      March 9, 2011..............................................   225
    Written statement of the Independent Insurance Agents & 
      Brokers of America.........................................   226
    Written statement of the National Association of Insurance 
      and Financial Advisors.....................................   232
    Written statement of the National Association of Mutual 
      Insurance Companies........................................   237
    Letter from George Keiser, president of the National 
      Conference of Insurance Legislators (NCOIL), dated July 29, 
      2011.......................................................   252
    Letter from George Keiser, president of the National 
      Conference of Insurance Legislators (NCOIL), to 
      Commissioner Susan Voss, president of the National 
      Association of Insurance Commissioners (NAIC), dated July 
      29, 2011...................................................   253
    Letter from Hon. Greg Wren, treasurer of the National 
      Conference of Insurance Legislators (NCOIL), dated August 
      1, 2011....................................................   254
Dold, Hon. Robert:
    Responses to questions submitted to Letha Heaton.............   256
    Responses to questions submitted to Clay Jackson.............   258
    Responses to questions submitted to Leigh Ann Pusey..........   259
    Responses to questions submitted to Susan Voss, along with 
      responses to questions submitted by Representatives Royce, 
      Stivers, and Garrett.......................................   266
    Responses to questions submitted to Hon. Greg Wren...........   275
Garrett, Hon. Scott:
    Insert from Dirk Kempthorne, ACLI president & CEO............   276
    Responses to questions submitted to Hon. Greg Wren...........   277
Royce, Hon. Ed:
    Responses to questions submitted to Hon. Greg Wren...........   278
Sherman, Hon. Brad:
    Responses to questions submitted to Gary Hughes..............   279

                      INSURANCE OVERSIGHT: POLICY
                    IMPLICATIONS FOR U.S. CONSUMERS,
                          BUSINESSES, AND JOBS


                        Thursday, July 28, 2011

             U.S. House of Representatives,
                 Subcommittee on Insurance, Housing
                         and Community Opportunity,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:01 a.m., in 
room 2128, Rayburn House Office Building, Hon. Judy Biggert 
[chairwoman of the subcommittee] presiding.
    Members present: Representatives Biggert, Hurt, Capito, 
Garrett, Dold, Stivers; Gutierrez, Cleaver, and Sherman.
    Also present: Representative Green.
    Chairwoman Biggert. This hearing of the Subcommittee on 
Insurance, Housing and Community Opportunity of the Committee 
on Financial Services will come to order. I would like to 
welcome the witnesses here today.
    We will begin with our opening statements, and I will yield 
myself 4 minutes.
    Good morning and welcome to this hearing entitled, 
``Insurance Oversight: Policy Implications for U.S. Consumers, 
Businesses, and Jobs.'' And I certainly welcome today's 
    Today, we will hear testimony that covers much ground, 
ranging from a number of domestic Federal, and State regulatory 
initiatives to international initiatives, including 
congressional ratification of three pending free trade 
    For over 150 years, the U.S. insurance industry has been a 
growing and vibrant source of financial security for millions 
of Americans. Insurance companies of every kind including life, 
property, casualty, auto, health, and reinsurance have been 
regulated primarily by the States with Congress occasionally 
reviewing that State-based system to ensure uniformity and 
    The McCarran-Ferguson Act of 1945 maintained the States' 
regulatory authority over insurance unless a Federal law 
expressly provides otherwise, such as flood and terrorism 
insurance. All that changed with last year's passage of the 
Dodd-Frank Act.
    For example, the Dodd-Frank Act created the Financial 
Stability Oversight Council, or FSOC as we call it, charged 
with designating which financial firms are too-big-to-fail. The 
FSOC has done nothing but create uncertainty for the financial 
services industry, especially for insurers.
    In fact, I have heard from many insurers that they are not 
expanding their companies and creating jobs because over 1 year 
after Dodd-Frank became law, it is still unknown what FSOC and 
the Federal regulators could do to their business.
    The Dodd-Frank Act also required regulators to establish 
what was known as the Volcker Rule, which some proponents claim 
will curtail speculative trading and investments that amount to 
gambling by financial services firms.
    However, many insurers traditionally invest for the purpose 
of avoiding risk. These insurers fear that they may be subject 
to a new Volcker Rule that limits their ability to hedge 
against risk. These are a couple of examples of the broad array 
of uncertainties the Dodd-Frank Act has created for the 
insurance industry.
    On the domestic front, Federal and State officials as well 
as the private sector must coordinate and redouble our efforts 
to help our U.S. insurers by facilitating streamlined, less 
burdensome and costly, but more effective regulation.
    Does that mean insurance should be federally regulated? I 
would say, no. The State-based system of insurance regulation 
has worked and endured. Some would say it has even thrived 
during the harshest of conditions and during this most recent 
financial and economic crisis.
    Our goal is to ensure that any financial regulatory 
measures do not: one, lead to fewer choices and higher costs 
for consumers; two, hamstring businesses so that they cannot 
expand; and three and most importantly, prevent businesses from 
creating desperately needed jobs.
    Regulation at any level, Federal or State that is 
duplicative, burdensome and costly should be strongly 
reconsidered. I encourage today's witnesses to think seriously 
about working together to find common ground instead of 
continuing to compete against each other where no one wins.
    As for U.S. insurers' position in the global market, it is 
up to us. I truly believe that if the President can transmit 
the free trade agreements to Congress, if Federal officials, 
State insurance regulators, and the industry can develop 
unified positions on insurance standards and regulations, and 
if the United States can soon fully engage with the 
international community, our insurers will be competitive.
    I hope that today's hearing will review what action or 
inaction Federal and State regulators and perhaps Congress 
should consider taking to bolster U.S. insurance for the 
benefit of consumers and businesses but also to facilitate job 
    With that, I yield to the ranking member, Mr. Gutierrez 
from Illinois, for his opening statement.
    Mr. Gutierrez. Thank you.
    Thank you, Chairwoman Biggert, for holding this hearing on 
insurance oversight. And I would like to welcome our witnesses 
    Of course, there are many who would like government to just 
disappear until they need $700 billion to get bailed out.
    There are always those who say that less regulation, no 
regulation at all would make the economy prosper. So, if we 
would disappear, everything would be just hunky-dory.
    I don't know if that is exactly true, but I understand it. 
Everybody wants less regulations because they want higher 
profits; I get that part.
    But I think we also have to make sure that American 
consumers are well served. So I think we need to find that 
balance and I am certainly always going to try to seek that 
balance out between the needs of the business community and the 
needs of American consumers that sometimes are on a path and 
collide with one another--their self-interest.
    But I do want to say to the chairwoman that I think that 
one size probably doesn't always fit all and that not all 
financial institutions that are $50 billion or greater, or 
whatever amount you want to make, are identical or would create 
the same kinds of risk to our markets--at least systemic risk 
to our markets.
    I look forward to looking at--and I think particularly 
insurance companies don't present the same kind of risk, 
although they may be larger and they may be in the hundreds of 
billions of dollars. An annuity is a different way of holding 
risk--life insurance is another kind, and the manner in which 
they judge their risk.
    So, I think there is merit to looking at how it is we move 
forward. And I think that all legislation should be up for 
review including what I supported very vigorously, the Frank-
Dodd Act.
    That is one area where I hope I can work with Chairwoman 
Biggert in making sure that we don't put cumbersome regulations 
or statutory regulations on institutions that we really figure 
don't need them. So, I look forward to working on that.
    When we passed the Wall Street Reform Act last year, we 
included very important provisions to create a Federal 
Insurance Office, or FIO, and among the duties tasked is the 
ability to receive and collect data, something that had been 
previously lacking among State insurance regulators.
    The law also included a provision that directs FIO to 
coordinate with each relevant agency and State regulator to 
determine if the information to be collected is available and 
may be obtained from other agencies before collecting data from 
the insurance industry. They did this to minimize any potential 
compliance cost.
    Subsequently, the law contains an explicit exemption for 
small insurers and their affiliates from data collection 
requirements. The newly created FIO will have the proper 
authorization to monitor and evaluate access to affordable 
insurance products to underserved communities.
    This authority promises to help people have access to the 
proper insurance, which I think is extremely important. I am 
happy to report that Mr. Mike McRaith, former Illinois State 
Insurance Commissioner, has recently taken the position of FIO 
Director, and I would like to wish him well in that position.
    On another note, I appreciate that the President moved 
swiftly to choose a nominee, Ray Woodall to serve as Financial 
Stability Oversight Council Voting Insurance Expert. The FSOC 
is charged with identifying the threats to the financial 
stability of the United States.
    It is reassuring to know we will never again find ourselves 
on the brink of economic collapse. Filling these positions is 
critical to the implementation of proper oversight and 
accountability. I hope the newly created FIOS will empower 
consumer representation. So, I hope to see more of that 
    We have a broad range of issues here at the subcommittee, 
and I look forward to listening to the witnesses. And I thank 
the gentlelady, the chairwoman for calling the hearing.
    Chairwoman Biggert. Thank you, Mr. Gutierrez.
    I might note that Director McRaith was invited to attend 
today but was unable to do so, so that we will be meeting with 
him later.
    And I would now recognize another gentleman from Illinois, 
Mr. Dold, for 3 minutes.
    Mr. Dold. Thank you, Madam Chairwoman. I want to thank you 
obviously for calling this important hearing, and I want to 
thank all the witnesses for taking the time to come and testify 
before us today.
    The insurance industry is a large and critical component of 
our financial services industry and of our economy generally. 
The insurance industry directly employs over 2 million 
Americans with stable, well-paying private sector jobs.
    Our insurance industry is also the source of billions of 
dollars of private sector investment capital that is invested 
each and every year. These investments help other businesses 
get started, expand, and create even more good, stable, well-
paying private sector jobs in all kinds of other industries.
    And while providing these direct and indirect jobs and 
other economic benefits, our insurance industry provides many 
millions of American policyholders with peace of mind, 
security, and compensation in difficult, unfortunate, and 
sometimes tragic circumstances.
    But along with all of these positive factors, the insurance 
industry has some challenges that Congress can and should 
    The first and most urgent challenge is getting Congress to 
pass a responsible, long-term National Flood Insurance Program 
    Under Chairwoman Biggert's leadership, the House has 
overwhelmingly passed that kind of reauthorization legislation 
on a bipartisan basis, with over 400 votes. We are all looking 
forward to a prompt Senate passage and to the President signing 
this important legislation.
    But now, we have an equally important obligation to 
carefully examine how Congress can help modernize the insurance 
industry's regulatory framework, while identifying and 
supporting helpful industry-related initiatives.
    This raises important and possibly difficult questions 
about the interaction between Federal and State regulations, 
the interaction of regulations among the different States, and 
how our domestic regulations and trade agreements compare to 
those of foreign nations and are interconnected in the global 
    In the end, our objective here is to create the conditions 
that will maximize private sector job growth, economic 
prosperity, and global competitiveness, while also ensuring 
that consumers are adequately protected and have access to a 
broad range of affordable insurance products.
    I look forward to hearing from our witnesses about how we 
can achieve these goals and objectives together.
    I might not have time to ask all of the questions during my 
allotted time for questioning, so I might, and probably will, 
be submitting some in writing.
    And so, I want to thank the witnesses in advance for both 
their testimony here today and for their thoughtfulness in 
answering my written questions that will most likely be 
    And with that, Madam Chairwoman, I yield back.
    Chairwoman Biggert. Thank you.
    The gentleman from Missouri is recognized for 2 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    I am not sure I will take 2 minutes. I wanted to use my 
allotted time to welcome my fellow Missourian, John Huff, to 
this subcommittee hearing.
    He is the director of the Missouri Department of Insurance. 
He came to that position from many years of working in the 
industry, and he brought that experience to the State.
    We appreciate the work that he has done in Missouri. And he 
was also named earlier this year as the State representative to 
    I was pleased to see that happen, because in that position, 
he brings not only the insurance perspective, but the State 
regulatory perspective to the discussions around the Federal 
financial system.
    So, I would like to welcome Mr. Huff, and I look forward to 
his testimony.
    Thank you for being here.
    Chairwoman Biggert. Thank you.
    The gentleman from Virginia, the vice chair of the 
subcommittee, Mr. Hurt, is recognized for 1 minute.
    Mr. Hurt. I thank the gentlelady for yielding, and I 
appreciate her leadership as this subcommittee engages in the 
important work of examining the ways in which Federal policies 
are impacting the insurance industry in Virginia's 5th District 
and across the country.
    The Dodd-Frank Act significantly changed the manner in 
which the Federal Government interacts with the insurance 
    Dodd-Frank called for the creation of the Federal Insurance 
Office to represent the interests of insurers in the context of 
international regulatory negotiations. The bill also created 
the Financial Stability Oversight Council and included 
insurance within the realm of FSOC's oversight.
    It is critical that we closely monitor the activities of 
the FIO and the FSOC to ensure that their activities do not 
unnecessarily interfere with the insurance industry and the 
consumers that they serve.
    While primary regulation of the insurance market remains 
focused at the State level, we must be mindful of the 
cumulative impact of State, Federal, and international 
regulatory mechanisms with which the industry must comply.
    Excessive and unnecessary regulation, I believe, will 
inhibit the growth of free and open insurance markets, while 
also limiting consumer choice.
    Again, I would like to thank Chairwoman Biggert for holding 
this important hearing today. I look forward to hearing from 
the witnesses, and I yield back the balance of my time.
    Chairwoman Biggert. Thank you.
    I would ask unanimous consent to have one of our members of 
the full committee, Mr. Green, give an opening statement for 2 
    Hearing no objection, you are recognized for 2 minutes.
    Mr. Green. Thank you, Madam Chairwoman.
    I thank the witnesses for appearing, and I thank you for 
the privilege to sit and be a part of this august body, and I 
will yield back the balance of my time.
    Chairwoman Biggert. That was a fast 2 minutes.
    We will now turn to our witnesses, and, again, welcome. Let 
me just say that I will introduce the witnesses, and then you 
will have 5 minutes to give a summary of your statement. We 
will then go to questions, where we will have 5 minutes and try 
and keep to that also.
    So on our first panel, first, we have Mr. John Huff, 
director of the Missouri Department of Insurance, Financial 
Institutions and Professional Regulations, and he is also on 
the FSOC Committee. Thank you so much for being here.
    Second, Ms. Susan Voss, commissioner, the Iowa Insurance 
Division, and president of the National Association of 
Insurance Commissioners. It is very nice to have you here 
    And third, the Honorable Greg Wren, treasurer, the National 
Conference of Insurance Legislators. Welcome.
    We will start with Mr. Huff. You are recognized for 5 


    Mr. Huff. Thank you, good morning, and thank you again for 
the privilege to testify today.
    My name is John Huff, and I am director of the Department 
of Insurance, Financial Institutions and Professional 
Registration for the State of Missouri. I serve as a non-voting 
member of FSOC and I am also a member of the NAIC.
    Today, I will discuss our views on systemic risk in the 
insurance sector, highlight the activities of FSOC that could 
impact insurance, and then touch upon our international work 
regarding the development of criteria to identify Global 
Systemically Important Financial Institutions or G-SIFIs.
    As you know, insurance is a unique product. And while bank 
products involve consumer deposits that are subject to 
withdrawal on demand at any time, insurance policies involve 
upfront payment in exchange for a legal promise to pay benefits 
in the case of a future event.
    U.S. insurance companies are also subject to stringent 
regulatory requirements, designed to ensure that claims are 
paid in a timely manner.
    It is the view of the NAIC that traditional insurance 
products and activities do not typically create systemic risk.
    However, connections with other financial activities and 
non-insurance affiliates may expose some insurers to the impact 
of systemic risk, and certain products may provide a conduit 
for systemic risk.
    While much of the Dodd-Frank Act was not aimed at the 
insurance sector, there are a number of FSOC activities that 
will have an impact on insurance companies and regulators.
    First, FSOC released a study on the Volcker Rule 
implementation in January. And that study confirmed that the 
business of insurance should be accommodated by permitting 
insurers to continue to engage in investment activities.
    It also highlighted the importance of consulting with State 
insurance regulators throughout the rulemaking process.
    Second, with respect to the non-bank designation process, 
members of the Council have previously testified that the 
Council intends to provide additional guidance and seek public 
    FSOC continues to work hard on this guidance with the 
intention of releasing it for comment in the near future. And I 
encourage all insurance sector participants to weigh in on that 
    Third, FSOC released its inaugural annual report on Tuesday 
of this week. The report underscores that insurance companies 
generally withstood the financial crisis well, and have 
strengthened their balance sheets. The report also describes 
several of the regulatory improvements that the insurance 
regulators have completed since the crisis.
    At the same time, the report identified certain areas that 
insurance regulators need to continue to monitor closely, 
including insurer exposures to commercial and residential 
mortgage-backed securities, municipal bonds, and specific 
European exposures, as well as the higher-than-usual claims 
activity resulting from the severe weather in States like my 
own, when Missouri is recovering from the Joplin tornado, the 
largest insurance event in our State's history.
    Finally, during earlier testimony before Congress, I 
expressed my concerns about the inadequate representation of 
insurance interests and specifically insurance regulators on 
    I am pleased that now Mike McRaith, the former Illinois 
director, has become the first Director of the Federal 
Insurance Office. Mike is well known among NAIC members, and I 
consider us very fortunate to have him in this role.
    I am also pleased that Roy Woodall has been nominated by 
President Obama to be FSOC's first voting member with insurance 
expertise. And I am hopeful that he will be able to join the 
Council as soon as possible.
    I can testify today that FSOC is very close to having its 
full complement of insurance members on the board as required 
by the statute.
    However, I must report to you that the ability of State 
insurance regulators to provide input regarding FSOC's 
important work remains limited.
    Such consultation will be vitally important in the coming 
months, as FSOC determines the criteria to be used to identify 
systemically important, non-bank firms, and then evaluates 
these firms for such designations.
    The NAIC is a founding member of the International 
Association of Insurance Supervisors, the IAIS, and is a 
committed member in all of the major IAIS committees and 
subcommittees, and serves as vice chair of the IAIS financial 
stability committee, which is developing criteria for 
identifying insurers that are G-SIFIs.
    There are processes in place that enable committee members 
to consult with fellow insurance regulators who have unique 
expertise or insights on specific business models, practices or 
institutions to help ensure that appropriate methodologies are 
being considered. This is in marked contrast to my work on 
    The United States is a member of the Financial Stability 
Board, which is engaging directly with the IAIS on critical 
issues, including G-SIFI identification. Our direct involvement 
in this process is critical since the FSB is a bank-centric 
    Through the IAIS, we continue to stress that insurance 
needs need to be distinguished from banking. And we have urged 
the U.S. FSB representatives to reinforce our input and 
    Further, the FSB is moving very rapidly in its activities, 
and I would encourage Federal regulators and legislators alike 
to be mindful of both the scope and speed of the Board's 
activity, as this institution should give appropriate deference 
to the regulatory authorities of its member nations.
    In conclusion, throughout the debate over and the 
implementation of the Dodd-Frank Act, my fellow regulators and 
I have fought to deliver the message that one size does not fit 
    Both the nature and regulation of insurance products are 
fundamentally different from the nature and regulation of 
banking and securities instruments. And we remain hopeful that 
these differences will be adequately acknowledged and 
accommodated by FSOC and by our international counterparts.
    Thank you for the opportunity to testify today, and I would 
be pleased to answer your questions.
    [The prepared statement of Mr. Huff can be found on page 
101 of the appendix.]
    Chairwoman Biggert. Thank you so much.
    Ms. Voss, you are recognized for 5 minutes.


    Ms. Voss. Thank you.
    I am pleased to provide you with a brief overview of recent 
insurance regulatory activities, including how State insurance 
regulators are responding to the Dodd-Frank Act, contributing 
to international standard setting, and improving U.S. insurance 
    As you know, the Dodd-Frank Act acknowledges the 
differences between insurance and other financial products, as 
well as the strength of the State-based insurance regulatory 
    The State insurance regulators, through the NAIC, have 
provided input on four main areas of Dodd-Frank implementation: 
FSOC; orderly resolution; derivatives regulation; and surplus 
lines and reinsurance. And we are also closely monitoring the 
implementation of the Volcker Rule, the Federal Reserve's new 
authorities to oversee SIFIs and thrift holding companies, and 
the development of the Federal Insurance Office.
    I would just like to highlight our efforts on the 
provisions of the Dodd-Frank Act affecting regulation of non-
admitted or surplus lines insurance, which became effective 
just days ago. Under the law, a surplus lines placement is 
subject only to the regulatory and taxation requirements of the 
policyholder's home State.
    So to that end, the law authorizes, but does not require, 
States to enter into an interstate compact or an agreement to 
allocate surplus lines premium taxes. The NAIC members believe 
it is imperative to preserve the ability of States to receive 
premium taxes based on the risks located in a given State.
    So, we established a task force to develop a State-based 
solution that would lead to a Nonadmitted Insurance Multi-State 
Agreement or NIMA, a proposal for addressing premium tax 
allocations. NIMA does not transfer supervisory authority to a 
single compacting entity, but it allows States to share premium 
taxes in a manner consistent with Dodd-Frank.
    NIMA provides a single point of tax filing, utilization of 
common reporting, schedules, tax allocation formulas, and 
allocation schedules and a single blended tax rate for each 
participating State. NIMA responds to many of the concerns 
raised by surplus lines brokers while seeking to preserve State 
tax revenues.
    Eleven States and Puerto Rico have joined NIMA thus far. 
And other States have sought alternative solutions including an 
interstate compact approach. We expect States may ultimately 
gravitate toward the solution that preserves their maximum 
level of premium tax revenues.
    I will focus the rest of my comments on the NAIC's 
continued efforts to improve the State-based system of 
    As you know, the financial crisis underscored a need for 
State insurance regulators to enhance and improve group 
supervision. It is not enough to focus on transactions with an 
insurance company.
    We need to look through the windows and understand the 
contagions that could impact insurers. Yet, we must retain the 
walls when examining material exchanges between insurers and 
other parts of the group.
    So, the NAIC adopted revisions to our holding company model 
act and model regulations to provide regulators the ability to 
better assess enterprise risk within a holding company's 
system, and its impact on an insurer within the group. 
Ultimately, this enhanced windows-and-walls approach should 
provide greater breadth and scope to solvency supervision.
    The financial crisis also revealed that the insurance 
sector overly relied on credit ratings. The NAIC acted to more 
closely align the capital requirements for residential and 
commercial mortgage-backed securities with appropriate economic 
    Our new process results in a more accurate reflection of 
the risk of loss. And perhaps the greatest single source of 
concern for the insurance regulators during the financial 
crisis was securities lending activities by AIG.
    We have acted to enhance transparency in securities lending 
agreements through improved guidance and additional annual 
financial statement disclosures. On the future of insurance 
regulation, State regulators began the Solvency Modernization 
Initiative in 2008.
    Known as SMI, this project is a critical self-examination 
of the U.S. insurance solvency system in conjunction with 
international developments regarding insurance and banking 
supervision, and the potential use of international accounting 
standards in the United States.
    We believe that SMI will drive changes to our overall 
regulatory system. We must learn from international 
developments, but we cannot abdicate our regulatory 
responsibility. International regulatory forums and standard 
setting organizations provide critical opportunities for 
regulators to cooperate, but they should respect the different 
legal, regulatory, and cultural approaches around the globe.
    We are devoting significant resources to our international 
activity. Solvency II and equivalency recognition in Europe 
highlights the various systems of regulation. While we support 
the Europeans' efforts to modernize their solvency regime, we 
want to help when we can with this worst financial crisis in 
    We believe that our system is at least equivalent to 
Solvency II on an outcome basis and have been urging Europe to 
view equivalents as an outcomes-focused process which will 
avoid putting U.S. or European insurers at a competitive 
    Those are just a few of the things that we are focusing on 
at this time. I thank you for the opportunity to testify, and I 
look forward to your questions.
    [The prepared statement of Commissioner Voss can be found 
on page 178 of the appendix.]
    Chairwoman Biggert. Thank you so much.
    Mr. Wren, you are recognized for 5 minutes.


    Mr. Wren. Thank you, Chairwoman Biggert, Ranking Member 
Gutierrez, and members of the subcommittee. Thank you for 
inviting me to testify before the subcommittee on behalf of the 
National Conference of Insurance Legislators, NCOIL, on the 
very important subject of insurance oversight.
    My name is Greg Wren. I am an Alabama State Representative 
and currently serve as treasurer of NCOIL.
    I am pleased to be here today to discuss with you our 
shared concern; that of the proper oversight of the insurance 
market and the best interest of all involved.
    Like you, NCOIL wants to make sure that the insurance 
marketplace works effectively and efficiently to promote better 
products, satisfy consumers, and healthy and thriving 
    NCOIL supports and has worked for modernization and 
uniformity in the State where and when it is needed. We, as 
State legislators throughout the country with the sole focus of 
sound insurance public policy, believe that the States have the 
tools to promote and facilitate that level of modernization 
going forward.
    NCOIL appreciates that the committee has acknowledged the 
many assets of State regulation, and has not sought to preempt 
our authority to regulate our unique State markets and to 
protect our insurance consumers. We are optimistic that the 
newly created Federal Insurance Office, and other recently 
formed Federal agencies, will also respect the authority and 
strength of the State system--strength that was evidenced 
during the recent financial crisis.
    We also believe that proposals such as an optional or 
mandatory Federal charter would only serve to undercut the 
successful State system now in place. NCOIL is working and will 
continue to work with our State regulators, consumer advocates, 
and industry to strengthen and enhance regulation in key areas 
that are in need of reform.
    NCOIL collaborated with the NAIC and the NCSL to develop a 
successful Interstate Insurance Product Regulation Compact, 
IIPRC, a speed to market vehicle for life insurance products 
now in force in 41 jurisdictions. NCOIL has worked closely with 
the NAIC to simplify agents and broker licensing and make it 
easier for a licensed agent or broker to do business in another 
    NCOIL continues to work for better market conduct 
regulation, and has encouraged our regulator colleagues to 
modernize exam procedures to free companies from duplicative 
and costly exams by regulators.
    I would like to discuss in more depth NCOIL's most recent 
modernization effort to streamline surplus lines, insurance 
taxation, and regulation consistent with your intent under the 
Dodd-Frank Act.
    Today, NCOIL is releasing to you a report entitled, 
``Implementing the Dodd-Frank Act, State Activity and SLIMPACT 
and NCOIL Response.'' Dodd-Frank gave States a very short 
window of opportunity to comply with NRRA provisions, leaving 
State legislatures, depending upon our schedule sessions, from 
as little as 40 days to only 6 months to pass legislation.
    Following the enactment of Dodd-Frank, NCOIL, CSG, and NCSL 
to no avail, called upon Congress to extend the effective date 
of NRRA surplus lines provisions by at least 1 year to give 
States additional time to join SLIMPACT.
    For the last year, the States have been trying to figure 
out how to best protect their current surplus line tax revenues 
at a time when every State budget dollar counts.
    Because States have never needed to collect data on home-
Stated versus multi-State risk, they have no information to 
rely upon. As a result, the States have reacted in various 
ways, such as enacting SLIMPACT, the NCOIL model, passing 
legislation to tax 100 percent of premium on home-Stated multi-
State risks, authorizing insurance regulators and/or governors 
to enter into compacts and/or agreements, signing an NAIC-
backed Nonadmitted Insurance Multi-State Agreement or NIMA, or 
passing no legislation at all and taking a wait and see 
    NCOIL, together with NCSL and CSG, has endorsed SLIMPACT as 
the only policy solution that fully responds to the NRRA, as it 
would ease the burden of surplus lines taxation, provide 
uniformity asked for in the Dodd-Frank, and ensure that the 
States receive their fair share of premium taxes.
    Concerns exist with the other approaches that don't fully 
address the Dodd-Frank's intent such as NIMA, which has and 
will continue to face constitutional challenges about its 
improper and unconstitutional delegation of authority to a 
regulator who by statute is subject to enforcing laws, not 
making public policy.
    In addition to the legislative group's endorsements of 
SLIMPACT, it is also supported by the very groups and 
individuals who asked for the NRRA, including the insurance 
industry and producer organizations.
    Modeled after the successful life compact, the SLIMPACT 
Commission will serve the compacting States and is authorized 
to create rules upon those that are agreed by its members.
    Though SLIMPACT becomes fully operational when there are 10 
States or contracting States, Commission representatives from 
the 9 current member States are busy at work. SLIMPACT is now 
honing in on its obligations and we will look forward to 
progressing further.
    We are optimistic that States can, as they have, Madam 
Chairwoman, for over 150 years, adapt to changes in an 
increasingly global marketplace and protect their consumers and 
    Our achievements with regulation of insurance in the States 
stand out against the failures of other financial services 
sectors, and show that the States can do their job. NCOIL 
believes that targeted insurance reform can work if it is based 
on coordination, transparency, and disclosure and 
accountability, and if it embraces the State system.
    Thank you for this time, and I look forward to the 
opportunity for any questions.
    [The prepared statement of Representative Wren can be found 
on page 192 of the appendix.]
    Chairwoman Biggert. Thank you so much.
    For the record, I would just like to say, without 
objection, all members' opening statements will be made a part 
of the record. Also, without objection, the written statements 
of the panelists will be made a part of the record.
    With that, we will now turn to our questions. And I will 
yield myself 5 minutes.
    Mr. Huff, and if all the witnesses would care to answer, 
that is fine--the Dodd-Frank Act has listed 11 factors for FSOC 
to take into consideration to designate any nonfinancial--
nonbank financial company which may include an insurance 
company as a Systemically Important Financial Institution, 
    In addition, the Dodd-Frank bill says that a bank holding 
company would have to have at least $50 billion in assets to be 
designated by FSOC as an SIFI. For nonbank financial companies, 
the criteria to make the SIFI designation is much less clear.
    Do you think that without any other SIFI criteria, the $50 
billion threshold is already discouraging insurers with assets 
just under $50 billion from growing and creating new jobs?
    In other words, although to date no companies have been 
designated as SIFIs, is the SIFI designation already limiting 
the growth and jobs measure for insurers?
    Mr. Huff. Thank you for the question.
    You are correct that under the Dodd-Frank Act, the $50 
billion threshold for enhanced prudential standards only 
applies to the bank holding companies. And FSOC has a great 
deal of latitude with respect to designating non-banks for 
heightened prudential supervision.
    In my view, size alone is not a good indicator of systemic 
risk. It is especially problematic from the insurance 
perspective, since many of the largest non-bank financial 
companies are insurers with large on-balance-sheet assets, 
specifically to support their liabilities such as their 
potential policyholder claims.
    And obviously, we don't want insurers to grow to such an 
extent, or engage in activities that may make them systemically 
risky. But the analysis regarding insurance companies should be 
more refined than an analysis of just the size of one's balance 
    Designation should be based on a number of indicators of 
systemic riskiness, in addition to size, including 
interconnectedness, off balance sheet exposures, leverage, and 
existing regulatory scrutiny.
    I do have concerns that a peer-sized threshold could 
potentially dissuade insurers from growing in healthy ways. So 
I share your concern in that regard.
    Chairwoman Biggert. Thank you.
    Would anybody else care to comment?
    Then, Ms. Voss--and this is just a very quick question. The 
NAIC has supported NARAB II during the last two terms of 
Congress. Does the association continue to support that 
legislation as introduced this year?
    Just a yes or no or a short statement, and then I would ask 
that you would submit comments for the record.
    Ms. Voss. Absolutely. Thank you, Congresswoman.
    Yes, we do support continuing work on the NARAB II. I know 
we are in conversations with the agent community and the 
    We think there are some refinements that can be made to 
make it even better, because we know this is an issue that 
everybody wants to resolve. So I will get you additional 
    Chairwoman Biggert. That would be great, so that we can use 
that as we proceed.
    Then my third question, is it possible for the NAIC and 
NCOIL to harmonize the two different models, NIMA and SLIMPACT, 
to achieve the goal of streamlining the surplus lines 
regulation and taxation, as outlined in--maybe you can just get 
together now--
    --but as outlined in Title V, how are the States working to 
achieve the goal? And why doesn't NAIC work with the SLIMPACT 
model instead of creating another model in NIMA?
    Ms. Voss. I will talk first, and then I will let 
Representative Wren answer.
    I think that we both, obviously, as different organizations 
decided we would go ahead, our organization groups, that we 
should get something going.
    I think, given some discussions we have had recently 
between some of our members, who both have passed NIMA and have 
passed SLIMPACT, there is a lot of discussion about 
    I think you will see, down the road, as States begin to 
look more fully at this, you will see some more discussions 
between us. Obviously, each State has their own opinion on 
which way they want to go. But I think you will see further 
discussions between the organizations.
    Chairwoman Biggert. Thank you.
    Mr. Wren?
    Mr. Wren. Yes, ma'am. I would agree.
    And I think one of the key issues that we have been dealing 
with is the fact that in a very short period of time in 2011, 
nine State legislatures did, in fact, adopt SLIMPACT within a 
very, very short timeline that we were given by Congress to be 
able to move forward on the SLIMPACT model.
    And, again, I would suggest that even in the legislation 
that passed in these 9 States, what is pretty significant to 
me, Madam Chairwoman, is the fact that in those States, in most 
of those States, the commission representative is the insurance 
commissioner of those States.
    That was ceded by the State legislatures to these SLIMPACT 
commissions. So there is a parallel and a consistency of 
working together, so we did, in fact in those States did cede 
that responsibility of commission representation.
    So, I would agree that there is no cookie-cutter approach, 
as we look at the surplus lines industry. It is a massive 
undertaking. We appreciate Congress for stepping up to the 
plate and giving us the tools that we can now be in this type 
of dialogue going forward.
    Chairwoman Biggert. Thank you.
    My time has expired, so I recognize Mr. Gutierrez for 5 
    Mr. Gutierrez. Thank you.
    And, again, thank you to the witnesses for coming.
    So, Mr. Huff, regarding Dodd-Frank and the insurance 
industry, name one good thing and one thing that needs to be 
    Mr. Huff. Actually, I think the establishment of the FIO is 
a good thing. I think it will help us have a single voice 
internationally. But I think we need to recognize that the 
State regulators will also continue to have a very active role 
    As the functional regulators, and as we get into the weeds 
on regulation and particularly how we are deemed equivalent, 
that expertise must be brought to the table, so FIO is a good 
    I think we still have challenges in making sure that our 
State regulators are fully involved in the FSOC process. And I 
am hopeful, with Director McRaith joining and potentially, 
hopefully, Roy Woodall joining, that we will make progress in 
that regard.
    Mr. Gutierrez. And you had a little bit of a disadvantage, 
Ms. Voss, but the same question?
    Ms. Voss. I do think the FIO, with Director McRaith, is 
going to be really beneficial and I hope to have discussions 
with him.
    I think the more information that you have as policymakers, 
the better. And I guess, as one person who has been very 
involved in the international level as well, we are the 
functional regulators and actually, the other regulators around 
the world look to us when we are talking about group 
supervision of these companies that act globally.
    So, I think the more that we can have representation, and 
our expertise at FSOC, that will be very important.
    Mr. Gutierrez. Mr. Wren?
    Mr. Wren. Yes, sir. I hate to agree with all of them, but I 
think the FIO, just because of the sheer fact that it was 
probably 10 or so years ago, as Congress began to wrestle with 
the likelihood of the possibility of a National Insurance 
Office under an optional Federal charter that has been around 
for a while, we saw a very strong migration away from policy 
perspectives, away from a peer Federal insurance agency in 
Washington, into an information gathering and an entity, as 
Director Huff has just said, that allows for the collection of 
data, allows us to be more involved in the international front.
    So, I really do concur on the FIO issue. I do suggest one 
thing that we would like to see improved on, on behalf of 
7,000-plus State legislators, is an active voice by the State 
legislators in FSOC.
    In any other Federal agency that comes down the pike, we 
are still the legislators who are involved in the determination 
of statutory responsibilities at the State levels.
    And you folks are very keen to that, and understanding. And 
we hope that, on behalf of NCOIL and our 7,000 State 
legislators in the future, maybe from the leadership of this 
committee, our representation might be allowed to participate 
going forward.
    Mr. Gutierrez. Let me just--okay, so there is a difference 
between New York Life, and State Farm, and AllState insurance 
companies, that most of the American public probably knows 
about, engages in, and AIG, which I never had an insurance 
policy with. Maybe I was behind the curve, and I should have.
    AIG, I think we would all agree, caused great harm and 
threat to our economic system.
    Mr. Huff, did we take care of it, so we don't get another 
    Mr. Huff. I think that is part of the purpose of FSOC, to 
bring Federal regulators together with State regulators on 
insurance, to identify any gaps in regulation.
    I think Dodd-Frank did make substantial progress in helping 
us to identify where we have regulatory gaps, bringing the 
people together, and to think that we had to have legislation 
to bring regulators together is a point for discussion.
    But we did, and we do, and now folks are talking. So I 
think that will be the best preventative tool, preventive tool, 
so we don't have another AIG.
    But it is important to remember where the gaps were in AIG, 
and the strength of AIG was and continue to be its insurance 
operations. And the riskiness of AIG was in the non-insurance 
section of that company. And so that is important for us to 
remember the history of how we got there.
    Mr. Gutierrez. I guess the point that--part of the problem, 
when you mix and match, It is not exactly--everyone thinks of 
insurance as just insurance. They do make other kinds of 
investments and are involved in other parts of our economy.
    So, Ms. Voss, same question.
    Ms. Voss. I think the devil was in the details on this. It 
is great that we can all sit around the table.
    Now what do we do with the knowledge base we have, when we 
look at these huge systemic organizations, and how we are going 
to meld our reviews of those?
    If we can get there with FSOC, and the legislation, that is 
a good thing. But we certainly have, I think, a long way to go 
on determining now where do we go as far as who regulates what, 
and how do we do it and meld it together.
    Mr. Gutierrez. How long do you think before that gets 
resolved, and we can get all back together here again, and talk 
a little bit about what we have done?
    Ms. Voss. Hopefully, when you get--if Mr. Woodall is 
confirmed, and you can get a full complementary, I think there 
will be some robust discussion.
    And, maybe within--probably Director Huff knows that better 
than I--6 months or a year there might be more information.
    Mr. Gutierrez. Mr. Wren?
    Mr. Wren. Yes, sir.
    Having spent more than 30 years as an insurance agent with 
the Northwestern Mutual Life Insurance Company, and 
understanding the insurance industry, I think quite well, yet 
serving much like you in an elected capacity; I think we have a 
tremendous opportunity to see the successes of the insurance 
industry in America by product line, by company, by region, by 
State, to see the tremendous solvency situations that present 
themselves as models, I think, for the other components of the 
financial services sector.
    And as you shared yourself, the differences between a life-
only company or a life and a PC company, whatever they might 
be, the sheer fact is, at the State level, regulators and 
legislators are on the cutting edge of making sure that 
solvency is critical and those claims will be paid.
    And I think the stalwart aspect of what we will continue to 
do is to work with Congress to make sure that those bulwarks 
are always maintained.
    Mr. Gutierrez. I guess that should probably be our 
challenges, to make sure that we don't have another AIG, and 
something that is systemically risky like that. And at the same 
time, not to put undue--I am going to help you out--not to put 
undue burdens on an insurance industry that didn't really cause 
the kind of risk. So I think there is a difference, I want to 
work. And I would hope that we wouldn't stop the nominations 
process, so that we can get this work done.
    Thank you.
    Chairwoman Biggert. Thank you, Mr. Gutierrez.
    Just two quick comments--first, as a former State 
legislator, I appreciate your perspective, Mr. Wren. And 
second, for the record, AIG's holding company was actually a 
thrift and a federally regulated thrift. And as the witnesses 
said, there was a separation there.
    So with that, I recognize Mr. Hurt, the vice chair, for 5 
    Mr. Hurt. I thank the Chair.
    I want to first of all thank each of you for appearing 
before us. And as I am sure you are aware, the Consumer 
Financial Protection Bureau is something that has been of great 
interest here in Washington of late.
    I would like to confirm probably with each of you--Ms. 
Warren, as the CFPB is taking shape, has stated that she 
believes that insurance does not fall within the jurisdiction 
of the CFPB.
    I wanted to get each of you to just speak to that.
    Do you agree with that assessment as the law currently is, 
and do you see any basis in the future?
    And we know how Washington operates and how bureaucrats 
operate. Do you see any basis in the future for expanding that 
authority within the CFPB absent explicit legislation from the 
United States Congress?
    I will start with Mr. Huff, and then Ms. Voss, and Mr. 
    Mr. Huff. Thank you for the question.
    I agree with your conclusion that insurance is not included 
in the agency's jurisdiction. And I think it is also a 
testament to the strong consumer affairs departments that we 
have throughout the State and all 50 States, and the 
significant work we do to address consumer issues.
    It is the area that I spend the most time on in my State, 
to make sure consumers are treated fairly and that their issues 
are responded to.
    And to be fair to insurers, not all of those queries are 
complaints. They are really an opportunity for us to have an 
education process. Many times, they are more inquiries of how a 
product works, what did I buy? And so that is an area where I 
think we can do even more on at the State level.
    But I am concerned in all aspects of Dodd-Frank for us to 
be vigilant on mission creep. Because I think we need to be 
careful that because insurance is excluded from that agency, 
that there are no back door attempts that may have potential to 
cause confusion for consumers.
    Mr. Hurt. Thank you.
    Ms. Voss. I would say that one of the positives that has 
come out of the whole Dodd-Frank debate was reaching out to 
Federal regulators to share information. And I have to say, we 
have struck a very good conversation with Chairman Schapiro 
from the SEC about consumer issues.
    And whenever we are in Washington, we always reach out to 
her and her staff. And we actually have regular dialogues. The 
Federal Reserve comes to our meetings.
    So I think as far as consumer protection, I would agree 
that this new body does not have authority over insurance. But 
we are reaching out to talk to Federal regulators on a regular 
basis about consumer issues.
    Because we know that people who are buying insurance 
products may be interested in securities products and other 
financial instruments. And for us to at least have regular 
dialogue with them is very helpful in the interchange of 
    Mr. Hurt. Madam Chairwoman, do you see any basis for future 
expansion of the CFPB's footprint into insurance absent 
legislation by the United States Congress?
    Ms. Voss. I don't think so. I hope not.
    Mr. Hurt. Thank you.
    Mr. Wren. Congressman, I would like to say that NCOIL, in 
collaboration with this committee and the Congress, has 
strongly encouraged the insurance component to be left out.
    And I think one of the reasons why we made that strong case 
over the last couple of years is simply because it allowed us 
to present the case about how effective the States are in 
resolving consumer complaints and consumer issues through our 
regulatory agencies across the country.
    The business of insurance being left out, I hope, portends 
that in the future it will remain to be left out. I think as 
long as we continue to do our job, we will benefit from it.
    We also have a strong system that we work with as State 
legislators, as regulators, the North American Association of 
Securities Administrators, NASAA, the National Association of 
Attorneys General. We have a strong State-based group 
throughout the canopy of our efforts in the consumer areas to 
benefit everybody from Alaska to Wyoming.
    So the future, I hope, is much as it is today. As long as 
we continue to do our job, work in concert with Congress, we 
look forward to being able to make sure that those lines of 
insurance stay out of it. And we will work collaboratively with 
the Congress going forward.
    Mr. Hurt. Thank you. I yield back.
    Chairwoman Biggert. Thank you, Mr. Hurt.
    The gentleman from Missouri is recognized for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Let me direct my first question to you, Mr. Huff.
    You bring some uniqueness, I think, to the FSOC. And so I 
am wondering whether your fellow FSOC members are listening to 
the State perspective that you might bring, and to the 
insurance perspective. Are you finding fertile ground as these 
extremely important financial issues are surfacing?
    Mr. Huff. Thank you for the question. And the FSOC 
process--it has certainly been my privilege to serve with the 
regulators on FSOC. And folks have been very respectful of me 
and of my views, particularly bringing an insurance 
    I think we did miss some opportunities during this first 
year of not having the full complement of insurance expertise 
on FSOC. But as we have all stated here, we have made great 
progress in that regard.
    And now with all three of those spots being filled, 
hopefully very quickly, I just think we need more dialogue on 
those insurance issues. And hopefully, that will move us 
forward in making sure that insurance is properly recognized.
    Mr. Cleaver. Thank you.
    This is for any of you. The question is, are small insurers 
sufficiently protected from potential burdens of having to 
comply with the data request from the FIO?
    Mr. Huff. There are some parameters within Dodd-Frank that 
do protect small insurers. But just the broader issue of data 
collection, Congressman, I think is one that is worth speaking 
to, because our National Association of Insurance Commissioners 
is really a data powerhouse in terms of insurance regulatory 
    And it is so important that we don't--through the efforts 
of the OFR or the FIO or FSOC, through any of those efforts, it 
is so important that we don't duplicate what we already have in 
place. And we have already made those investments for that data 
    And as you know, much of that data sits in your district. 
So it is important that we think through methodically how we 
can share that data on a meaningful basis with all regulators.
    Mr. Cleaver. Mr. Wren, do you concur?
    Mr. Wren. Yes, sir.
    Mr. Cleaver. I yield back the balance of my time.
    Chairwoman Biggert. Thank you.
    The gentleman from Illinois is recognized for 5 minutes.
    Mr. Dold. Thank you, Madam Chairwoman.
    Ms. Voss, I understand that as currently written, the 
NAIC's Nonadmitted Insurance Multi-State Agreement or the NIMA 
tax allocation methodology, which seems to involve a novel 
allocation of casualty lines, is burdensome on brokers and will 
add cost to consumers.
    Does the NAIC, or do the NIMA States have the ability to 
refine the allocation methodologies, especially since the tax 
clearinghouse isn't operational yet?
    And can you tell us when the NIMA clearinghouse might be 
fully operational?
    Ms. Voss. We have 11 States and Puerto Rico that have 
passed NIMA. And they are in discussions right now on a 
    Obviously, this is just at the beginning stages. We would 
probably take issue if people believe that it is going to 
increase taxes. And I know there have been a number of 
different legal opinions.
    Having said that, I have to say that 11 States have 
probably had their legal counsels look at it, and felt 
comfortable in passing the legislation. Right now, there is 
discussion between the NIMA States and Puerto Rico about 
vetting a process to have someone set up the clearinghouse 
similar to IFTA, the fuel tax association.
    So, that is what we are looking at right now and haven't 
made any clear decisions about. But we are certainly in 
discussions right now. They have just added a couple of other 
States, so I think it will be coming on very soon.
    Mr. Dold. Okay. The NAIC has taken the position that it is 
not a State governmental entity, while at the same time it has 
testified to Congress that it should be recognized as a 
regulatory agency in Federal law.
    Absent an insurance regulator with national authority, has 
the NAIC become a de facto national insurance regulator?
    If so, is this role and function appropriate with the 
NEIC's stated mission authority and advocacy practices?
    Ms. Voss. The NAIC is really our organization that helps us 
put standards together, standard setting, and sort of 
collectively represents what our thoughts are. We don't put 
ourselves out as some regulatory body.
    Having said that, I think through even Federal regulation 
laws, if you look at the Health Care Reform Act, the NAIC has 
been asked to set standards for certain processes under PPACA. 
And so collectively, the regulators get together and discuss 
    But we don't hold ourselves out as some kind of Federal or 
national regulatory system. We are a national body that 
represents all of the regulators.
    Mr. Dold. The existing insurance regulatory structure is a 
barrier to product portability, in my opinion. When consumers 
move to a new State, producers must register, take tests, do 
background checks, and pay fees to continue serving the 
customers with which they have established relationships.
    I am sure you have encountered this with a number of people 
that you work with.
    Similarly, products are not uniformly offered from State to 
State so that a product that meets a California consumer's 
needs might not be available to that same customer if he or she 
moves to my State of Illinois.
    How do you recommend that we encourage greater uniformity, 
meaningful licensing reform, and an efficient product approval 
under the existing State-based structure?
    Ms. Voss. I will address it in a couple of different ways. 
First of all, we have the interstate compact on policy on life 
products and annuities and some long-term care--42 States have 
joined the compact. So it is a once and done for those 42 
    We would encourage the other States, such as New York and 
California and Florida--having said that though, there are 
States that have barriers to joining compacts because of their 
    We all--as Representative Wren, he is a policymaker in his 
own State. And they may choose to comply or not or enter into 
an agreement.
    We totally agree that there needs to be greater uniformity 
and producer licensing. And we have been working very hard on 
that as we try to work through NARAB II.
    And obviously once again, some States have different 
opinions on how they want to protect their consumers, what 
products they want to be allowed in their States. That is 
always going to be a challenge for us as State regulators. And 
so we look for things like compacts or agreements to help us 
further those set uniformity charts.
    So, I understand your concerns. We will try to work through 
those as best we can on a State by State basis.
    Mr. Dold. Thank you. Mr. Huff, the ability to bring new 
innovative insurance products to market continues to be one of 
the greatest challenges with the existing regulatory system. 
What regulatory changes can be made to bring new products to 
the market across the country more quickly?
    Mr. Huff. I guess I would add on the asset-based products, 
I would build on what Commissioner Voss just talked about, 
about the interstate insurance compact that we have on life and 
asset products--which actually Illinois has just joined that 
compact, one of our most recent members--that it is a great 
vehicle for speed to market as we term it, to get products 
through a vetting process to make sure consumers are protected, 
and that they are actuarially sound.
    And so, I would say that is a very strong vehicle for new 
product development.
    Mr. Dold. Thank you so much.
    Madam Chairwoman, my time has expired.
    Chairwoman Biggert. The gentleman yields back.
    The gentleman from Ohio is recognized for 5 minutes.
    Mr. Stivers. Thank you, Madam Chairwoman. And I appreciate 
the panel and appreciate your testimony.
    My first question is for Mr. Huff. I believe that the 
property casualty insurance industry is not systemically risky. 
And I wanted to get your opinion on whether you foresee any 
property casualty insurance companies being designated as 
systemically important financial institutions?
    And if so, do you think that would be appropriate?
    And then, I would like you to address the mutual model too. 
Do you think that the mutual model of property casualty 
companies is systemically risky?
    Mr. Huff. In my initial comments, I did give the NAIC view, 
and it is my view as well, that traditional operations and 
traditional--particularly on the P and C side, those operations 
would not, in my estimation, be systemically risky.
    And I guess the caveat to that of course is the 
interconnectedness or any non-insurance activities that are 
going on. So, I think the clearest story to tell is on the P 
and C side, that I think it would certainly be a stretch to see 
how any of those activities would be systemically risky.
    Mr. Stivers. Great. Thank you so much.
    My next question is for Ms. Voss. You said earlier that 11 
States had joined the Nonadmitted Insurance Multi-State 
Agreement. Have any States passed the surplus lines--insurance, 
multi-State compact? I don't think any have.
    Ms. Voss. Nine States have passed it, yes.
    Mr. Stivers. Oh, nine have? Okay.
    Ms. Voss. And it becomes operational at 10 States.
    Mr. Stivers. Okay.
    Ms. Voss. And I would just add to that--and of course 
Representative Wren can talk as well--there are a lot of States 
that are trying to blend those two, or they have legislation 
    Mr. Stivers. That is really the next part of my question--
    Ms. Voss. I am sorry.
    Mr. Stivers. --is there a way to blend those two models?
    And can they easily be put together? Or are there things in 
the two--because I have not studied either one of them in 
detail--that would make it hard to blend the two?
    Ms. Voss. I think there are. And I will let Representative 
Wren speak--
    Mr. Stivers. I guess I should ask Representative Wren about 
    Ms. Voss. I think that there are ways to meld the tax 
    One of the challenges for some States is they have a 
constitutional amendment that doesn't allow them to enter into 
certain compacts that cede certain authority to a compact. So, 
that is a challenge.
    But given that, I think there are some ways we can look at 
the tax--
    Mr. Stivers. Great. I will direct to Representative Wren, 
and as a former--
    Mr. Wren. Yes, sir.
    Mr. Stivers. --co-chair of NCOIL, I appreciate what you do 
and we wrangled with those--I was the author of the interstate 
    Mr. Wren. Yes, you were--
    Mr. Stivers. --in Ohio. And we wrangled with a lot of those 
issues that make it difficult. But we got around them. And I 
know a lot of States can ultimately get there.
    But are you finding it hard to put those two proposals 
    Mr. Wren. Congressman, first of all, thank you, and I 
appreciate you being here as an NCOIL colleague. I look forward 
to you inaugurating the NCOIL caucus here in the U.S. House.
    But I think as President Voss has said, as we try to deal 
with the dynamics of the organizations, whether it is the NAIC, 
or NCOIL, and the NCSL, the State legislative groups, it is 
obvious that we have to respect a tremendous amount of local 
    You have been there. And you understand, most of you, and 
the chairwoman has already said that. I think one of the 
elephants in the room would be the allocation formula issue.
    SLIMPACT is very close to working out internally with our 
situation the allocation formula that I think will be using the 
readily available data, and simplicity, and uniformity. And I 
think that will be a hallmark of what we are doing.
    I think we are going to have to have some strong dialogue 
going forward as to whether or not we can look at blending or 
melding in some way the NIMA models, the SLIMPACT model, or for 
those States that right now are taking the wait-and-see 
approach, which very well could cost State budgets when every 
dollar of the State budgets are very critical.
    So the important aspect of this particular hearing is that 
we are here in this panel, and we appreciate the time. And we 
will talk in the hallways and hug each other.
    Mr. Stivers. Great. One last question for Representative 
Wren, because I have about 50 seconds left.
    Do you foresee any changes that are necessary in the Dodd-
Frank Act as you figure all this stuff out at the State level?
    Mr. Wren. Yes, sir. I think probably again--and I think the 
most important aspect is that we would beg Congress to allow 
your State legislators through our organizations as you would 
deem fit working with us, to have a voice--to be not just in 
Washington, or in a room, but to be at the table when you begin 
to make more significant determinations about the insurance 
aspects of financial services.
    We do beg your indulgence and your participation in 
including us going forward, as we look at these critical issues 
with you.
    Mr. Stivers. Thank you so much. And I do want to just make 
a plug for the fact that these interstate compacts work.
    Obviously, there are some States that don't join, but they 
work pretty well.
    Mr. Wren. Yes, sir.
    Mr. Stivers. Thank you, Madam Chairwoman. I yield back.
    Chairwoman Biggert. Thank you.
    The gentleman from New Jersey is recognized for 5 minutes.
    Mr. Garrett. I thank you very much. And I thank the Chair 
for holding this hearing today.
    I just have a couple of questions for the panel, but before 
I do that, may I enter into the record from the ACLI their 
letter of Dirk Kempthorne and--president of--I don't see a date 
on it, but may I enter it in the record?
    Chairwoman Biggert. Without objection, it is so ordered.
    Mr. Garrett. Thanks very much.
    For Ms. Voss, greetings, good morning--so as you probably 
know, with regard to the Dodd-Frank bill, although we were not 
much in support of that, I was I guess you could say the lead 
Republican sponsor in the bill with regard to the surplus lines 
reform section.
    And so I wonder if you could just comment on whether you 
think that the provisions that were set forth in that bill are 
being carried out with regard to the NAIC's implementation of 
the law?
    And whether or not it frustrates, whether it complies with 
it, goes along with it? Or whether it frustrates it with 
respect to the aspects of the burdens that it places on brokers 
with respect to the cost that it places on consumers?
    So if you can explain how the NAICs Nonadmitted Insurance 
Multi-State Agreements, and specifically the tax allocation 
methodology, whether or not they adhere in your opinion to the 
letter and the spirit of the law that we were trying to 
champion in that legislation?
    Ms. Voss. I think the model that was passed by the NAIC 
membership does meet the mandates.
    I know there is a lot of discussion that somehow this 
represents a tax increase. But at least our general council has 
opined that joining NIMA does not increase policyholders' 
    It is we are utilizing a clearinghouse and the taxing 
authority of the insured's home State on a multi-State 
placement, to preserve the present aspects of the present 
system, whereby States receive a portion of the premium tax 
based on the amount of the risk located in the State.
    And under NIMA, any State-specific assessments must be 
included in the State's blended rate, and would apply to the 
portion of the risk located in the State.
    Specifically, NIMA mandates the use of a single blended tax 
rate for participating States, a provision that was added 
pursuant to industry suggestions. And in addition, NIMA 
establishes uniform requirements for premium tax allocation 
    And while there may be some disagreement among regulators 
and industry about some of the details of the allocation 
formulas, regulators have expressed their willingness to 
continue to engage in a dialogue.
    And I think in my previous comments, we have talked with 
some of our members who are members of SLIMPACT, and members 
whose States passed NIMA who are trying to find a way on this 
tax allocation, so that we can reconcile this.
    Obviously, the Dodd-Frank bill was not as prescriptive as 
to say, this is the way you must do it. So, it is left to the 
States and the regulators to determine that. And there are two 
different versions and we are trying to see how we can come to 
some kind of agreement.
    Mr. Garrett. I appreciate that. So at this point in time 
from your testimony you just gave--you would say that there is 
not, in your perspective, an additional burden on the consumer.
    Ms. Voss. That is what we believe.
    Mr. Garrett. Okay. And with regard to the brokers--you 
mentioned with regard--
    Ms. Voss. We don't believe so.
    Mr. Garrett. Okay.
    Ms. Voss. But we are always happy to talk to anyone--
    Mr. Garrett. Engage--
    Ms. Voss. --chat.
    Mr. Garrett. I appreciate that.
    Mr. Wren?
    Surplus line laws acknowledge that you can enter into 
what--multi-State agreements or compacts. Actually, I guess the 
terminology is--you can do that under constitution--
    Mr. Wren. Yes, sir.
    Mr. Garrett. --as well. But under this you now--you can do 
that? And if you do that--into a multi-State agreement, you can 
allocate the premiums pursuant to the terms of the statement.
    In your opinion, participation in a compact or agreement is 
not required by the NRRA. But in your experience, have States 
accurately understood the NRRA's objectives and that tax 
sharing is not required?
    Mr. Wren. I believe so. I think--yet we have fought with 
this very short time window that we had across the States to be 
able to engage as State legislative sessions began to start in 
January of 2011. So, I think more information is out there, 
which is why we at NCOIL had asked Congress last year for an 
extension of the time to be able to put our case back out 
    We would still hope that might be something that could be 
considered. But we are moving forward as expeditiously as we 
    I think that the fact that the strength we have of NCOIL, 
and NCSL, and council State governments, industry producers, 
regulators that we have worked with, stamping offices across 
the country--we feel like we have a very strong hold about the 
issues that are present here, particularly as we work through 
this tax allocation issue.
    Ms. Voss. May I add just one thing?
    Mr. Garrett. Please.
    Ms. Voss. I think in fairness to the States--and Iowa 
passed nothing. And we had both bills before the legislature.
    But on top of that, we were dealing with health care 
reform, new governors, new legislators. And I think, in a very 
short period of time, there was a lot on legislators plates, 
and I think if we had a little more time, we might have had a 
better system of getting this issue resolved.
    But time was kind of a concern for many of us.
    Mr. Garrett. That is a concern on a number of fronts that 
we are hearing in this panel and committee. But I appreciate 
your adding to that, of course.
    Mr. Wren. Thank you.
    Mr. Garrett. Thank you. I yield back.
    Chairwoman Biggert. Thank you.
    Just to follow up, do you think that we need still to 
extend the time?
    Mr. Wren. On behalf of NCOIL, absolutely. I think that is 
where the synergy is going to be more evidence itself as we can 
go forward on this is to allow us that time.
    We have done a yeoman's work, we think, in 9 States in 
about 100 days or 110 days. To move it through 9 legislatures 
in 110 days in 2011, we think, is particularly striking. We 
would look to support you in that effort, if there is anything 
that could be moving that could do such.
    Ms. Voss. Madam Chairwoman, the good thing would be that we 
are sort of coming down to two or three different options, then 
we can all look at those and see what is the best one.
    But, obviously, some of us will need a little more time.
    Thank you.
    Chairwoman Biggert. Thank you all.
    The Chair notes that members may have additional questions 
for this panel, which they may wish to submit in writing. 
Without objection, the hearing record will remain open for 30 
days for members to submit written questions to these 
witnesses, and to place their responses in the record.
    And I would like to thank this panel so much. You have been 
great witnesses and very, very helpful.
    So with that, you are excused, and we will go to the second 
    As the second panel moves forward, I would just like to, 
without objection, ask unanimous consent for the following to 
be included as part of today's hearing record: a statement 
dated July 28, 2011, from the National Association of Insurance 
and Financial Advisors; a statement dated July 28, 2011, from 
the Independent Insurance Agents and Brokers of America; a 
statement dated July 28, 2011, from the National Association of 
Mutual Insurance Companies; a statement dated July 28, 2011, 
from the Council of Insurance Agents and Brokers with an 
addendum; a letter dated February 10th from Chairman Baucus and 
Ranking Member Frank, Ranking Member Gutierrez and Chairman 
Biggert; a letter dated March 9th from Treasury Secretary 
Geithner; and a letter dated May 20th from me, Chairman 
Biggert, to Appropriations Subcommittee Chairman Emerson.
    I would like to welcome the second panel. And just for the 
record, without objection, your written statements will be made 
a part of the record.
    Our second panel, going down the line, consists of: Mr. 
Gary Hughes, executive vice president and general counsel, 
American Council of Life Insurers; Ms. Letha Heaton, vice 
president, marketing, Admiral Insurance Company, on behalf of 
the National Association of Professional Surplus Lines Offices, 
Ltd.; Mr. Birny Birnbaum, executive director, Center for 
Economic Justice; Ms. Leigh Ann Pusey, president and CEO, 
American Insurance Association, on behalf on the Financial 
Services Roundtable and the American Insurance Association; Mr. 
Andrew Furgatch, chairman and CEO, Magna Carta Companies, on 
behalf of the Property Casualty Insurers Association of America 
and the National Association of Mutual Insurance Companies; Mr. 
Clay Jackson, CPCU, senior vice president and regional agency 
manager, BB&T Cooper Love, Jackson, Thornton & Harwell, on 
behalf of the Independent Insurance Agents and Brokers of 
America and the Council of Insurance Agents and Brokers; and 
Mr. Eric Smith, president and CEO, Americas, Swiss Re, on 
behalf of the Reinsurance Association of America.
    Thank you all for being here.
    We will start with Mr. Hughes. You are recognized for 5 


    Mr. Hughes. Chairwoman Biggert, and members of the 
subcommittee, the ACLI appreciates the opportunity to discuss 
with you issues that are important to the life insurance 
    The insurance regulatory framework is undergoing some of 
the most profound change in its history, so your hearing is 
quite timely. We believe it is very important for the 
subcommittee, and other committees in Congress with 
jurisdiction over insurance, to have a sound understanding of 
how our industry operates and an appreciation of how your 
decisions and those of regulators affect our competitiveness at 
home and abroad.
    The number of domestic and foreign agencies, offices, 
departments, and organizations currently involved in the 
regulation of, or standard setting for, the insurance business 
is large and growing. Effectively coordinating U.S. policy and 
input for all of these groups is indeed a challenge.
    With that in mind, I would like to focus my remarks this 
morning on why the ACLI believes that the new Federal Insurance 
Office, FIO, is an extremely important new player in the 
insurance arena and why it is important for that office to be 
fully funded and staffed as quickly as possible.
    As others have said on the panel this morning, we have a 
strong State-based system of insurance regulation in the United 
States. And our State regulators have coordinated with us on 
the development of international standards, and engaged with us 
in those foreign markets where resolution of commercial and 
regulatory issues benefit from their expertise and involvement.
    We have also received strong support on trade issues from 
USTR and the Commerce Department.
    That said, we believe there is a continuing gap in the 
representation of U.S. national interests in international 
insurance and financial services forums. And we believe the FIO 
can and should be instrumental in filling that gap.
    I would like to highlight for you this morning two key 
matters in which we believe the immediate engagement of the FIO 
is essential.
    The first is the effort by the IAIS to develop criteria and 
a methodology for the designation of G-SIFIs. As the G-SIFI 
initiative has progressed, we have asked State insurance 
regulators to provide us with their views on the details of 
that project.
    We have also asked for their support in addressing concerns 
that the initiative conflicts with State insurance laws 
protecting the confidentiality of sensitive, non-public company 
    Unfortunately, our regulators have told us that they have a 
limited ability to discuss specifics due to admonitions by the 
IAIS that this is a closed regulatory only process.
    We also understand that a number of non-U.S. regulators 
have informally asserted that there are no G-SIFIs in their 
home country. Such a stance would protect their domestic 
insurers from heightened regulation, but it would potentially 
result in the creation of commercial winners and losers.
    We believe this is contrary to the intent of the G-20 
member countries and inconsistent with U.S. policy.
    Again, we have expressed our concerns to the NAIC and State 
regulators, but again we have been advised that they are not in 
a position to give us substantial help.
    The FIO could act as a strong Federal advocate and demand 
that the focus of the G-SIFI exercise be a balanced outcome 
that doesn't harm the competitiveness of U.S. insurance and 
reinsurance companies.
    The second area where we believe FIO needs to engage is 
working with State regulators and European policymakers to 
ensure that the United States is eligible for a deemed 
equivalency determination under Solvency II. If the United 
States is not deemed equivalent, U.S. insurers would be placed 
at a serious global competitive disadvantage, and non-
equivalency would also carry with it the potential for 
increasing costs and, correspondingly, rates for U.S. insurance 
    State insurance regulators have represented the United 
States in the equivalency discussions to date, but with the 
passage of Dodd-Frank and the creation of the FIO, there is a 
strong expectation by European policymakers that our Federal 
Government, through the office of the FIO, should be an active 
participant in the equivalency deliberations.
    On the domestic front, job one for us is and has been 
implementation of those aspects of Dodd-Frank relevant to life 
insurance companies. The attendant policy issues are largely 
resolved, but the outcome of various rulemaking activities will 
certainly shape our ultimate view of this new law.
    Among the issues that are most important to us are the use 
of derivatives to hedge portfolio risks, the Volcker Rule, 
holding company regulation by the Federal Reserve, harmonized 
standard of care for broker dealers and investment advisors, 
and FSOC's process for identifying systemically important 
financial institutions, and the regulatory consequences of such 
a designation.
    Our principal concern with each of these issues echoes a 
theme that you heard from the previous panel, which is that a 
fair balance be struck between regulatory interests on the one 
hand and legitimate business practices on the other. And our 
concern is heightened by the fact that there has been a 
tendency throughout the legislative and rulemaking process to 
view these issues largely through the bank lens.
    Life insurers are distinct from banks in terms of their 
fundamental business model, their financial structure, and 
their regulatory oversight. And a one-size-fits-all approach to 
rulemaking will not produce workable results.
    We believe the FIO can work constructively with the 
insurance industry and our regulators to more effectively 
address these issues.
    We also think the FIO has a role in the area of 
reinsurance. We have urged State regulators to coordinate with 
the FIO on determinations regarding the quality of reinsurer 
supervision in other countries.
    These determinations will be key to implementing 
reinsurance collateral reform in the United States. And 
collateral reform is critical to the European Commission as it 
considers equivalency under Solvency II.
    In sum, Dodd-Frank empowers the FIO to set U.S. 
international insurance policy and serve as a focal point 
within the Federal Government for information and expertise on 
the insurance business.
    Failure to provide the office with the resources necessary 
to carry out these functions risks harming U.S. 
competitiveness, both domestically and globally, and again for 
this reason, we urge that the FIO be fully funded and staffed 
as expeditiously as possible.
    Chairwoman Biggert, again, thank you for holding this 
hearing. And I would be glad to answer any of your questions, 
or those of the subcommittee.
    [The prepared statement of Mr. Hughes can be found on page 
108 of the appendix.]
    Chairwoman Biggert. Thank you.
    Ms. Heaton, you are recognized for 5 minutes.


    Ms. Heaton. Good morning. Thank you for taking the time to 
listen to our testimony today.
    Chairwoman Biggert, and members of the subcommittee, my 
name is Letha Heaton, and I am here today in my capacity as 
president of the National Association of Professional Surplus 
Lines Offices, NAPSLO.
    I am pleased to offer testimony regarding the impact of the 
surplus lines insurance reforms in the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, specifically, Title V, Part 
1 of the Act, otherwise known as the Nonadmitted and 
Reinsurance Reform Act, NRRA.
    After reviewing the written testimony of the NAIC 
yesterday, I will deviate from my previously prepared remarks 
to focus on some very serious concerns that NAPSLO and our 
membership and others in the industry have about the proposed 
NIMA approach to a State compact.
    The surplus lines reforms in Dodd-Frank were broadly 
supported and much needed, and intended to significantly 
simplify the non-admitted insurance market.
    But as I will explain, certain State interpretations and 
implementation of that law has, in our members' view, been 
inconsistent with Congress' intent, and threatens to undermine 
the good work of the committee and Congress in passing the law.
    I want to thank my colleagues in this hearing for also 
noting in their testimony their concerns with certain aspects 
of that State NRRA implementation currently being proposed by 
    In my remarks, I will briefly review why these surplus 
lines reforms were needed and comment on the State status of 
implementation, explain why NAPSLO has serious concerns about 
the NAIC's proposed tax sharing scheme, called NIMA, and 
suggests a way to fix NIMA's tax sharing methodology, should 
some States and the NAIC continue to pursue the NIMA approach.
    Very briefly, by way of background, NAPSLO is the national 
trade association representing the surplus lines industry and 
the wholesale insurance marketing system.
    Surplus lines insurance is property and casualty insurance 
that covers unique, unusual, or non-standard risks that are not 
typically offered by insurers operating in the admitted 
    The surplus lines market facilitates the economy by 
providing insurance cover for new businesses and innovative 
products, like green technologies and clinical trials for new 
medical therapies.
    Surplus lines insurers also provide a public interest 
backstop when crises like 9/11 or Hurricane Katrina restrict 
the capacity of the standard market. For this reason, we are 
known as safety net insurance.
    For years, the surplus lines insurance community regulators 
and industry alike required the need to streamline the 
regulation of surplus lines industry and modernize surplus 
lines tax reporting and allocation procedures.
    As envisioned by Congress and supported by all 
stakeholders, the NRRA would both streamline tax payment 
processes, and make more uniform, simple, and efficient other 
aspects of the surplus lines regulation to enable brokers who 
are the providers to more easily and efficiently comply with 
State requirements.
    Immediately after the passage of the Dodd-Frank Act, NAPSLO 
offered to help the NAIC, State policymakers, regulators, 
insurance brokers, and companies with NRRA implementation and 
with ongoing compliance, including drafting implementation 
legislation for each State and meeting with legislators and 
insurance commissioners.
    To date, 43 States have passed some sort of NRRA 
implementing legislation. And a number of these States as well 
as the NAIC have offered guidance and/or bulletins to brokers 
regarding the new home State rules for multi-State risks and 
other aspects of NRRA compliance.
    NAPSLO is alarmed if the NRRA is being implemented in many 
feed States as promoted by NAIC in such a way that will make 
things more complicated, worse, not better, for surplus lines 
stakeholders. I will explain and offer a suggestion for 
    As you have heard, there are two competing approaches for 
sharing multi-State surplus lines taxes: SLIMPACT, which is 
supported by NCOIL, and many industry stakeholders; and NIMA, 
which is proposed by NAIC.
    While there remain numerous uncertainties over the NAIC's 
NIMA system over how the NAIC's NIMA system would work, NAPSLO 
believes that the underlying proposal doesn't fulfill the 
intent of Congress to establish an efficient and more uniform 
regulatory process.
    NIMA focuses solely on creating a tax sharing system, while 
neglecting the law's other goal to make more uniform, simple 
and efficient other aspects of surplus lines regulation.
    Again, our industry is not interested in avoiding the 
regulation or the taxation. We just want a simple, efficient 
system that allows us to comply.
    The NRRA went into effect a week ago, and a dozen States 
have adopted NIMA.
    The NIMA system is far from operational, however. We have 
heard that the NAIC itself has proposed to run NIMA, so that 
for a fee and for profit, the NAIC would collect and allocate 
multi-State taxes.
    NAPSLO and other industry stakeholders have consistently 
opposed the NIMA tax-sharing system, because as currently 
drafted, it fails to create the non-tax regulatory efficiencies 
or uniformities envisioned by Congress, instead choosing only 
to address tax allocation issues.
    It violates the NRRA requirements that no State, other than 
the home State, may require any premium tax payments for 
nonadmitted insurance and it involves unnecessary and 
burdensome data reporting by brokers for the sole purpose of 
collecting taxes, including novel allocations, requirements for 
the casualty lines.
    NAPSLO strongly opposes NIMA's current tax allocation 
methodology as it is based--we see it as wholly unworkable for 
the vast majority of the industry. And if implemented, it will 
result in new costs and fees levied on surplus lines consumers.
    Let me be clear, NAPSLO patently disagrees with the 
testimony that NIMA is consistent with Congress' intent for the 
surplus lines reforms.
    A single tax payment to the contemplated NIMA clearinghouse 
is not worth the burden placed on brokers in the form of 
increased data reporting, the unworkable tax allocation 
methodology, and the systemic complexity inherent in the NIMA 
    To be consistent with Dodd-Frank--
    Chairwoman Biggert. Ms. Heaton, if you could conclude 
    Ms. Heaton. Okay.
    To be consistent with Dodd-Frank, we understand that the 
frustrations you hear from us--we would like to understand that 
the frustration that you hear from us is not directed at this 
    We commend you for passing the NRRA. Rather, NAPSLO members 
are frustrated and disheartened by the States' insistence, 
through NIMA elections, for the allocation methodology and want 
to address the regulatory concerns required by the NRRA in a 
different fashion.
    Thank you.
    [The prepared statement of Ms. Heaton can be found on page 
70 of the appendix.]
    Chairwoman Biggert. Thank you.
    Mr. Birnbaum, you are recognized for 5 minutes.

                        ECONOMIC JUSTICE

    Mr. Birnbaum. Thank you, Chairwoman Biggert, for inviting 
me to testify, and thanks to the other members of the 
    I am the executive director of the Center for Economic 
Justice, which is a nonprofit organization that advocates on 
behalf of consumers on insurance, credit, and utility issues.
    I would like to preface my testimony by saying that sound 
regulation is consistent with, and necessary for, job creation. 
We have seen the effects of ineffective and lax regulation with 
the financial crisis.
    With ineffective regulation, companies bring poor products 
to market. Those products explode.
    Those jobs that were created are lost, and then there is 
more job loss as the consumers whose wealth is lost, because of 
those defective products, now reduce their demand. Overall 
consumer demand is reduced, and we see the effect of that. We 
go into a recession.
    So, strong and efficient regulation is consistent with 
sustainable job creation and it is necessary for the creation 
of fair competition.
    The Dodd-Frank Act did have fairly limited activity in the 
realm of insurance. But the activities that are included, I 
think, are very useful.
    The Federal Insurance Office was created to create an 
expert on insurance at the Federal level.
    This is obviously useful, given the great number of Federal 
insurance programs: flood insurance; terrorism insurance; crop 
insurance; and a whole host of things the Federal Government is 
involved with.
    It surely makes sense to have an expert at the Federal 
    The Federal Insurance Office is involved in international 
issues. Again, this makes a lot of sense.
    Currently, we have individual States forming agreements 
with the regulators from foreign countries.
    We have the NAIC entering into agreements with regulators 
from foreign countries. The NAIC is a trade association. 
Clearly, there is a need for some sort of Federal presence to 
argue for the national interest in the realm of insurance.
    The third thing that the Federal Insurance Office does, 
through the Dodd-Frank Act, is it is given authority to look at 
the availability and the affordability of insurance.
    This is a direct response to the State regulators' failure 
over decades to address issues of insurance redlining. The FIO 
has the ability to collect data, to analyze redlining, and 
unfortunately, that is needed.
    State regulators have failed to collect any meaningful data 
to look at issues of availability and affordability. For 
example, in the past recession there was an issue of whether 
insurance credit scoring was harming consumers because of the 
    State regulators had no data on that. They were incapable 
of doing that.
    In contrast, if you look at what is available for lending 
products through the Home Mortgage Disclosure Act, regulatory 
agencies and fair lending organizations were able to do quite a 
bit of analysis on the nature of the problems in the lending 
market and where those problems were coming from.
    So, this set of authorities for the Federal Insurance 
Office is really important. And I think it is a direct 
challenge to State regulation.
    The State regulators could step up to the table. But if 
they don't, it seems to me that the FIO is in a position to 
fill that gap.
    The last point I would like to make is that the FIO is 
responsible for identifying regulatory gaps. Again, this is 
very important.
    If you look at the regulation of insurance, it is truly a 
hodgepodge. You have not only a number of States competing with 
each other for the most favorable regulatory climate, but you 
have admitted carriers, and non-admitted carriers. You have an 
interstate compact. You have risk retention groups.
    There are all sorts of opportunities not only for 
regulatory arbitrage, but for gaps between products that may be 
insurance or they may be financial products. We see those 
issues come to a head on things like annuities and other sorts 
of financial products that life insurers and banks sell.
    So it is really useful for the FIO to be able to identify 
these regulatory gaps.
    One of them that I want to bring to your attention is a gap 
related to credit-related insurance products. Right now there 
is a product called lender-placed insurance.
    If a consumer takes out a mortgage and fails to maintain 
insurance, the lender is able to purchase insurance--not 
purchase, but place the insurance and then charge the consumer 
for it. It is very, very expensive.
    And the lender has an incentive to do it because the 
lenders actually get a commission for this lender-placed 
product. The amount of lender-placed insurance grew from $1.5 
billion in 2004 to $5.5 billion last year. Despite being told 
about these problems, insurance regulators have failed to take 
any action.
    The payout on these products in the last 2 years has been 
about 17 to 18 cents on the dollar. This is the kind of thing 
that really burdens consumers who are already having a 
difficult time paying for their mortgage because of the 
economic recession.
    Now, this is the type of thing that says, this is done by 
lenders. Should it be regulated by the agencies that deal with 
lenders, or should it be regulated by insurance regulators? 
That is why there is really sort of a regulatory gap there.
    One of the things that you may consider--and I will finish 
up with this--is the idea that the Consumer Financial 
Protection Bureau, which currently does not have the authority, 
should be given the authority to work on credit-related 
insurance products. That way, the Financial Protection Bureau 
could address these problems in the event that State regulators 
    Thank you.
    [The prepared statement of Mr. Birnbaum can be found on 
page 52 of the appendix.]
    Chairwoman Biggert. Thank you.
    Ms. Pusey, you are recognized for 5 minutes.


    Ms. Pusey. Good morning, Chairwoman Biggert, and members of 
the subcommittee. Thank you for the opportunity to testify on 
behalf of the American Insurance Association in coordination 
with the Financial Services Roundtable.
    My name is Leigh Ann Pusey, and I am the president and CEO 
of AIA.
    I want to focus today on a few key priorities that are 
emerging from the confluence of the regulatory reform 
discussions that are going on at the international, Federal, 
and State levels.
    Among these are preserving the viability of the U.S. 
insurance regulatory system, furthering the growth of free and 
open insurance markets around the world, and underscoring the 
important role that the Federal Insurance Office can play in 
keeping U.S. insurers competitive.
    This key role is intended to complement the good work of 
State regulators and of the NEIC. If the FIO functions as 
written, together they will be able to present a harmonized 
national voice on international insurance matters.
    Now, let me focus on three specific international matters.
    First, while there is a robust discussion, as we have 
discussed at this table on the previous panel, under way here 
in the United States over the SIFI designation, there is also 
the parallel international process determining so-called global 
SIFIs, or G-SIFIs.
    We must ensure that this process accounts for the unique 
nature of insurance, and it is fair, transparent, and above all 
does not overtake Dodd-Frank implementation efforts.
    It is critical to note that the insurance industry emerged 
from the recent financial crisis safe and strong. This 
resilience is a testament to the industry's business model and 
its regulatory standards. And it must be taken into account in 
any determination process.
    Second, we share a common goal in ensuring that the U.S. 
insurance regulatory system is viewed as equivalent to the 
E.U.'s Solvency II initiative, recognizing however that those 
standards may not be identical.
    Third, we have a mutual interest in broadening market 
access, reducing trade barriers, and ensuring that regulatory 
initiatives do not impair private markets.
    And finally, as others have mentioned, we have a 
significant concern regarding Section 619 regulations under 
Dodd-Frank, the so-called Volcker Rule. We are hopeful that 
when rules are proposed, they will clarify that investments 
that are held in general and investment accounts of insurers 
are excluded from the rule.
    AIA is leading U.S. property casualty efforts to engage at 
the international level on a wide range of proposed financial 
standards. While some may view the current global debate as 
affecting only those companies that venture outside the United 
States, the plain truth is that the emerging financial 
regulation could impact all companies, whether or not they are 
engaged in foreign markets.
    One of those initiatives is the European Union's Solvency 
II, which is not simply a financial regulatory tool, but a 
comprehensive restructuring of regulation. Solvency II contains 
a third country equivalence process that has been the principle 
source of pressure for our regulators here in the United 
    The consequences of a negative equivalence determination, 
including having to meet solvency requirements without counting 
U.S. capital, are potentially severe, both for U.S. insurers 
doing business in E.U. countries and for E.U.-based insurers 
with U.S. operations. Therefore, it is critical for the U.S. 
system to be deemed equivalent under Solvency II.
    Apart from Solvency II and similar initiatives, the crisis 
has generated a global debate about systemic risk. And at the 
international level, the global SIFI process is being led by 
the G-20, which has turned to the Financial Stability Board to 
coordinate proposals for addressing global systemic risk.
    As AIA and others at this table have outlined in letters to 
Capitol Hill and the Administration, there are a number of 
dangers associated with the G-20 designation of insurers. Any 
global process must recognize the unique nature of insurance 
and should focus on those unregulated shadow financial 
    Finally, barriers to market access, usually through 
regulation, continue to be a major issue. We are strong 
supporters of the three pending free trade agreements. And once 
in effect, we believe they would open markets with large growth 
opportunities for U.S. insurers.
    In each of these discussions, whether it is Solvency II, 
the G-SIFI process, or market access, it is vitally important 
for the Federal Insurance Office to be at the table alongside 
other key representatives, providing a unified national voice 
for insurers.
    Congress envisioned this role for the FIO when it 
authorized the office to coordinate Federal policy and Federal 
efforts on prudential insurance matters, represent the United 
States before the International Association of Insurance 
Supervisors, assist the Treasury in negotiating bilateral or 
multilateral insurance agreements on prudential issues, and 
make recommendations to the FSOC regarding SIFI designation and 
    This is the role the FIO is uniquely qualified to fill.
    In summary, let me underscore an important message. The 
insurance industry emerged from the financial crisis in a 
strong position. But today, despite our strengths, we face 
regulatory challenges on the international stage that may 
adversely impact our business model and regulatory structure if 
not managed.
    Now, more than ever, we need the U.S. Government and our 
State regulators working together to help create a level 
playing field globally where U.S. insurers can compete and take 
advantage of new market opportunities.
    Thanks again for the opportunity to testify. I would be 
happy to take any questions.
    [The prepared statement of Ms. Pusey can be found on page 
123 of the appendix.]
    Chairwoman Biggert. Thank you so much.
    Mr. Furgatch, you are recognized for 5 minutes.


    Mr. Furgatch. Thank you, and good morning, Chairwoman 
Biggert, and the remaining members of the subcommittee who are 
    My name is Andrew Furgatch. I am chairman and CEO of Magna 
Carta Companies.
    Magna Carta was founded in New York in 1925 as a mutual 
insurance carrier for underwriting property and casualty 
business. Today, we are licensed in all 50 States and we employ 
240 individual in offices in 9 of those States.
    I am pleased to testify today on behalf of the PCI and 
NAMIC, two leading trade associations that together represent 
almost 70 percent of the property and casualty insurance market 
and have almost 2,000 member companies.
    I have two overarching messages to deliver today. The first 
is that the U.S. insurance industry is healthy and stable, and 
is also a stable provider of jobs for the U.S. economy.
    The second message is that our industry's ability to 
continue to manage risk and create jobs is being threatened by 
a dramatic expansion of new government regulations at the 
State, Federal, and international levels. The number and 
complexity of new compliance requirements is driving up 
marketplace costs and ultimately detracting from growth.
    Our plea to this committee is that you use your oversight 
and legislative authority to restrain non-insurance regulators 
from overly broad rulemaking and mission creep into the 
business of insurance as they rush to meet Dodd-Frank Act and 
international regulatory deadlines.
    The nature of P and C insurance products, the industry's 
low leverage ratios, its relatively liquid assets, and the lack 
of concentrations in the marketplace make our industry truly 
unique within the financial services sector, as well as even 
within the insurance sector.
    We operate in an extremely competitive marketplace, and our 
business model focuses on serving our policyholders by 
providing critical quality protection to all Americans at 
competitive prices.
    We believe that the regulation of P and C insurance has 
worked well in the States. For example, the State-based system 
proved to be effective during the recent financial crisis.
    The fiscally prudent regulatory oversight by the States 
safeguarded insurance consumers and ensured the financial 
strength of P and C insurance markets. Indeed, insurance 
regulation was one of the few bright spots in the International 
Monetary Fund's global review of financial services regulation.
    Our chief concern as we go forward is the prevention of any 
onerous or duplicative regulation of our already heavily 
regulated industry. Recent laws such as Dodd-Frank directly and 
indirectly affect P and C insurers.
    Now, although my written testimony that was previously 
submitted touches on many different concerns, I just want to 
highlight a few here.
    First among them is the ability of the new Financial 
Services Oversight Council to inappropriately sweep insurance 
into the regulation of highly leveraged, systemically risky 
banking activities. Traditional P and C insurance is not 
systemically risky, and it did not play a role in causing the 
recent financial crisis.
    Simply put, our primary risk exposure is directly related 
to Mother Nature: earthquakes; hurricanes; and natural 
catastrophes. And it is not correlated with the financial 
    We are concerned that FSOC and other Federal regulators may 
use inappropriate and bank-centric metrics when analyzing 
insurers, thereby subjecting them to burdensome and costly 
additional regulation.
    We are also concerned about the proliferation of new 
Federal entities that could potentially affect our industry, 
namely, the Federal Insurance Office, the Office of Financial 
Research, and the Consumer Financial Protection Bureau.
    The FIO and the CFPB should stay true to their legislative 
intent and not try to exert direct or indirect regulatory 
authority over insurance activities. Dodd-Frank explicitly 
states that the FIO and the CFPB are not to regulate insurance, 
and there is concern that they may seek to find backdoor ways 
to do so.
    The FIO and the OFR, on the other hand, should not be 
permitted to impose costly data calls on insurers without first 
seeking needed information from State regulators and other 
public sources as they are required to do so under the Dodd-
Frank Act. Therefore, we strongly urge Congress to monitor 
these offices closely to ensure compliance with your direction.
    Increasing threats to the insurance marketplace also 
include numerous and new burdensome standards developed by 
unelected and unaccountable international organizations. What 
started out as discussions about merely fostering cooperation 
between international regulators is rapidly evolving into 
efforts to impose binding new global standards on insurers 
right here in the United States.
    While U.S. Federal bank and State insurance regulators are 
involved in developing the new regulatory standards, the 
concerns of those U.S. participants are not always heeded. This 
abdication of State and Federal legislative control is very 
disconcerting to our industry.
    We urge the committee to vigilantly guard the exceptional 
competitiveness of the U.S. insurance marketplace and restrain 
the rush towards bank-centric international rules that add 
unnecessary layers of cost and oversight to our industry.
    In closing, I would like to say the health and stability of 
the insurance industry depends on Congress' ability to oversee 
Federal regulators in charge of the implementation of Dodd-
Frank. In order for us to continue to protect our 
policyholders, create the jobs that we are looking for, and be 
the foundation of a dynamic economy, these Federal regulators 
should refrain from intruding into the business of insurance.
    Thank you again for the opportunity to be here today.
    [The prepared statement of Mr. Furgatch can be found on 
page 60 of the appendix.]
    Chairwoman Biggert. Thank you.
    Mr. Jackson, you are recognized for 5 minutes.

                        & BROKERS (CIAB)

    Mr. Jackson. Madam Chairwoman and members of the committee, 
thank you.
    I am Clay Jackson, senior vice president of BB&T Insurance 
Services, the Nation's 6th largest brokerage firm.
    My testimony is on behalf of the Independent Insurance 
Agents and Brokers of America as well as the Council of 
Insurance Agents and Brokers.
    These two organizations span the overwhelming majority of 
producers of property and casualty insurance across the 
country, selling both personal lines and commercial insurance. 
My organization is a member of both.
    There have been historic distinctions between large 
regional and national brokerages and independent agencies with 
respect to some public affairs positions. But I can say with 
confidence that the differences between these associations are 
far outweighed by its common goals.
    I would like to make two points today. First, we think 
there is a significant consensus among all of the private 
stakeholders on the issue of agent-broker licensure reform, 
specifically, the NARAB II legislation that has been put forth 
on a bipartisan basis by Congressmen Neugebauer and Scott, and 
supported by many members of the committee.
    This legislation has twice passed the House of 
Representatives by overwhelming votes. We encourage you to 
advance this legislation once again and to help enact it into 
    We work in a business that is increasingly interstate and 
international. In response to the original NARAB provisions of 
the Gramm-Leach-Bliley Act, States adopted reforms to encourage 
reciprocity on nonresident licensure.
    But the reforms have simply not gone far enough. There are 
still far too many State by State distinctions and bureaucratic 
requirements to add cost to consumers and insurance products 
without providing value or assuring professionalism of those 
who are selling those products.
    The creation of the National Association of Registered 
Agents and Brokers, or NARAB, would resolve this problem. 
Agents and brokers who desire passport for interstate licensure 
would have to be licensed in their home States, fully subject 
to their home State laws, and then submit themselves to a 
higher standard for NARAB membership which would afford them an 
opportunity to obtain nonresident licenses in other 
    The organization would pay for itself, be purely voluntary, 
and would assure strong standards of professionalism. The 
producer community across-the-board supports this measure, and 
we look forward to working with Members of Congress in assuring 
the creation of an interstate agent-broker licensing system. It 
just makes common sense.
    My final point has to do with the State implementation of 
the Dodd-Frank provisions regarding surplus lines insurance. 
Unlike so much else in Dodd-Frank, these provisions were widely 
supported on both sides of the aisle, and we are deeply 
appreciative of the members of this committee who were helpful 
in getting this signed into law.
    Surplus lines insurance represents about a third of the 
commercial insurance marketplace, involving insurance risks 
that tend to be more sophisticated, exotic, and are largely 
    The surplus lines provisions of Dodd-Frank made it clear 
that the only rules that would govern a multi-State placement 
of surplus lines products, are the rules of the home State of 
the insured. This is simple and straightforward. And again, all 
of the major stakeholders supported these provisions.
    The application of this simple rule to the payment of 
surplus lines premium taxes has led to significant marketplace 
discord. Some States have agreed only to a sharing formula for 
premium taxes. Some States have signed on to a compact that 
would govern all aspects of a surplus lines transaction, and we 
are particularly appreciative of Kentucky's efforts to help 
ensure that the multi-State tax allocation is as rational and 
efficient as possible.
    Other States, especially some big States, will retain 100 
percent of the premium taxes for insureds headquartered in 
their jurisdictions. We think the single State tax retention 
model is probably best. It minimizes the administrative costs 
for both regulators and producers and should result in an 
overall increase in premium tax collections.
    Given that a single, harmonious regulatory system seems 
beyond reach at this point, we ask you to urge the States to 
seriously consider this path.
    We think the surplus line situation is good evidence there 
is justification for limited Federal reforms. It is indeed 
difficult for States to coordinate and streamline and harmonize 
in the absence of a broader political dynamic.
    Surplus lines reform will ultimately be good reform for all 
of us. Likewise, the NARAB II proposal is a modest, thoughtful 
bipartisan piece of legislation that merits enactment.
    Thank you for the opportunity to express our views. I 
appreciate it.
    [The prepared statement of Mr. Jackson can be found on page 
117 of the appendix.]
    Chairwoman Biggert. Thank you, Mr. Jackson.
    Mr. Smith, you are recognized for 5 minutes.


    Mr. Smith. Thank you.
    Chairwoman Biggert and members of the subcommittee, on 
behalf of the Reinsurance Association of America, and my 
company Swiss Re, thank you for this opportunity to testify.
    My name is Eric Smith. I am the president and CEO of Swiss 
Re Americas.
    Swiss Re is a global reinsurance company with a highly 
skilled workforce of several thousand U.S. employees. We 
transact business through U.S. taxpaying entities. The RAA is a 
U.S. national trade association, representing the interest of 
    Reinsurance is an efficient risk management tool that helps 
insurance companies and governments with improving their 
insurance capacity and enhancing financial security. For 
example, 60 percent of the insured losses related to the 
attacks of September 11th were absorbed by the global 
reinsurance industry.
    In 2005, 61 percent of the insured losses from hurricanes 
Katrina, Rita, and Wilma were ultimately borne by reinsurers. 
And in 2008, approximately one-third of the insured losses from 
hurricanes Ike and Gustav were reinsured.
    We applaud your creation of the FIO and offer our strong 
support for its establishment. We would like to share a few 
observations about the new office.
    For the first time, there is a Federal agency responsible 
for understanding the insurance and reinsurance industry. We 
urge Congress and the Administration to provide sufficient 
resources to ensure that the FIO can carry out the 
responsibilities it has been given.
    When using its data collection authority, we believe the 
FIO should coordinate closely with the Office of Financial 
Research, the NAIC and other existing regulatory and non-
regulatory sources to make use of credible data and avoid 
duplicative reporting.
    We also believe the FIO is required to address States' 
implementation of Sections 531 and 532 of the Dodd-Frank Act 
and the related reinsurance collateral reform efforts in its 
statutory reports to Congress.
    One important power that Congress granted the FIO is the 
authority to enter into and enforce international agreements 
with foreign governments on prudential insurance regulatory 
matters. This authority should be used to ensure equitable 
treatment of internationally active insurers and reinsurers and 
to promote economic growth and job creation here in the United 
    Whether it is discussing an international agreement or 
participating in a meeting of regulators from other countries, 
the FIO must be the clear and consistent voice of the United 
States on insurance-related issues internationally reflecting 
the interest of U.S. policyholders, insurers, reinsurers, and 
U.S. insurance regulators.
    This subcommittee knows that FSOC is empowered to evaluate 
and designate nonbank financial institutions as systemically 
relevant, and subject those companies to additional regulatory 
scrutiny. In order for a nonbank financial company to be 
designated systemically relevant, the FSOC must find that the 
financial stress or the ongoing activities of the company could 
pose a threat to the financial stability of the United States.
    This high standard was set by Congress to prevent 
unintended consequences resulting from uninformed systemic risk 
designations which could have lasting effects on a company, its 
employees, and shareowners in the U.S. economy.
    We urge the FSOC to delink all considerations for 
designating insurance companies from those used for banking 
institutions. The business models and roles in society of 
insurance companies and banks are distinct and should be 
considered separately.
    I would like to close with a couple of important lessons 
learned from the financial crisis.
    First, the significant gap in U.S. supervision of company 
groups must be closed in insurance regulation. A single 
regulator must be responsible for understanding and regulating 
a group.
    Second, systemic risk regulators must consider activity 
first rather than entities first if they hope to effectively 
identify potentially systemically important nonbank financial 
    The RAA has undertaken extensive, quantitative, systematic 
risk analysis using nonbank criteria proposed by systemic risk 
regulators as the basis for the work. The findings are part of 
our statement for the record.
    On behalf of the Reinsurance Association of America, and my 
company, Swiss Re, thank you for the opportunity to appear 
before the subcommittee.
    We are gratified that Congress continues to remain engaged 
in insurance related matters.
    [The prepared statement of Mr. Smith can be found on page 
136 of the appendix.]
    Chairwoman Biggert. Thank you so much.
    We will now turn to our questions. And I will recognize 
myself for 5 minutes.
    Ms. Heaton, before I really start my questions I think that 
you had a closing point that was important and probably not in 
your testimony, if you could conclude with that.
    Thank you.
    Ms. Heaton. Thank you, Chairwoman Biggert, for your time 
and giving me the opportunity to really restate our conclusion.
    It sounds to us like there has been a lot of progress today 
as a result of NAIC and NCOIL's testimony, and a realization 
that the current allocation methods may not be as practical as 
originally thought by some parties.
    And we hope that as a result of this discussion, and your 
listening to our testimony, that we will be able to harmonize 
and come to an approach that would meet all of our 
constituents' needs.
    I think the single primary basis behind our concern is that 
part of what is being required in the NIMA allocation 
methodology is the collection of data that is not normally part 
of the underwriting process in the placement of risk. And that 
would add an additional burden to brokers and companies who 
provide this coverage.
    Chairwoman Biggert. Thank you very much. I guess we could 
say they did hug.
    Ms. Heaton. Yes.
    Chairwoman Biggert. Hopefully, that will work out.
    Then, Mr. Furgatch?
    Mr. Furgatch. Yes.
    Chairwoman Biggert. You represent almost 70 percent of the 
property casualty insurance industry, ranging from national 
writers to very small local writers.
    And while your company is not at risk of being considered 
significantly--systematically--I have too many ``S's'' here--
systemically significant, can you describe for the committee 
the competitive disadvantages and other impacts on your company 
if FSOC were to designate any property casualty insurer as a 
systemically important financial institution?
    Mr. Furgatch. Yes, indeed, we have identified areas where 
we think there will be a competitive disadvantage. Chief among 
them is if there are particular companies that are identified 
as such.
    They may be viewed as too-big-to-fail by consumers, giving 
them a false sense of security, and leading them to be more 
likely to do business with those firms, thinking there may be a 
Federal backstop.
    Similarly, in the cost of funds area in terms of borrowing 
or raising capital, it might give those particular companies, 
identified as such, as a competitive advantage as well.
    Chairwoman Biggert. Thank you.
    Do you think that the $50 billion has any effect or that 
the insurance companies might fall under that or they are not 
wanting to increase their size for that reason?
    Mr. Furgatch. Certainly, there would be deterrent there as 
well. It probably wouldn't be difficult for firms of that size. 
They are typically multi-national, and they could perhaps move 
their assets around to other jurisdictions.
    Chairwoman Biggert. Thank you.
    Ms. Pusey, what do you think of the impact on the Dodd-
Frank Act known as the Volcker Rule will be on domestic 
insurance companies?
    And do you think that the language in the section to exempt 
insurance funds held in separate accounts provides sufficient 
protection and certainty for insurance companies to conduct 
their long-term investment and protection, and certainly for 
insurance companies to go ahead and have long-term investment 
and risk-hedging activities?
    Ms. Pusey. Thanks for asking the question.
    I think that Dodd-Frank went a long way in already 
acknowledging that insurance operated differently and should be 
treated differently with respect to the Volcker Rule. We 
appreciate that, and there are studies under way, etc.
    I think with respect to the way of the treatment of these 
accounts, we think it would be consistent with the intent to 
recognize that insurers with those kinds of accounts are doing 
so in a different way than the banks and other financial 
    It is our hope that they would clarify that in their 
forthcoming regs on that, and we think it is consistent with 
the intent of the legislation.
    Chairwoman Biggert. Do you think that the restrictions that 
are placed on insurers by the rule will help or hurt U.S. 
companies to compete in the global marketplace?
    Ms. Pusey. I think there is no question. In fact, I think 
there was a GAO study released recently that underscored that 
it would be a threat to competitiveness as the United States is 
the only country currently contemplating such restrictions.
    So, yes, ma'am, I think we do feel it would restrict and be 
a burden on the competitiveness of U.S. companies.
    Chairwoman Biggert. Do you think that Congress needs to 
clarify the insurance exception?
    Ms. Pusey. I will ask--I know there are some other members 
are looking at Gary Hughes here, who has a lot of companies 
that are interested in this as well. I think at this point, we 
would be hopeful that there would be clarification through the 
reg process and not a need to return to any further 
    Chairwoman Biggert. Okay.
    And now, I will turn to Mr. Hughes.
    Mr. Hughes. I think our feeling that is at this point the 
rulemaking on Volcker has clarified some of the areas that you 
have mentioned--proprietary trading, where it is the general 
account or the separate account of an insurer. There are some 
outstanding issues.
    But it seems to--the intent, which is not to 
inappropriately disrupt legitimate business practices, seems to 
be carrying through at this point.
    Chairwoman Biggert. Thank you.
    My time has expired.
    I yield to Mr. Hurt for 5 minutes.
    Mr. Hurt. Thank you, Madam Chairwoman.
    I thank each of you for being here and for your testimony 
    I wanted to first ask Mr. Birnbaum a quick question.
    In your testimony, you talked about the forced placed 
insurance, and I was, I think, relieved to hear you say that 
while you think that there is inadequate regulation now, you 
believe that forced placed, or that the CFPB ``should be given 
the authority to regulate this issue.''
    I guess my question to you is, I assume that means that you 
don't believe that CFPB currently has that authority. Is that a 
fair statement?
    Mr. Birnbaum. Yes, I think that is pretty clear.
    As the legislation was winding its way through Congress, 
there was a specific provision taken out that gave the CFPB 
authority to regulate credit-related insurance. So, I think 
that is pretty clear.
    Where it gets a little murky is that the CFPB does have 
authority to regulate lenders and lenders' practices, so if 
lenders' practices deal with lender-placed insurance, they 
certainly can't deal with rates, but they could deal with the 
servicing practice.
    Mr. Hurt. Okay. And that is my next question, do you see 
any basis at all, as you sit here today, to support that? And 
maybe that is the answer to your question.
    But do you see, in addition to what you have just said, any 
other basis by which CFPB would be able to regulate this, 
absent explicit legislative authority given by the United 
States Congress?
    Mr. Birnbaum. Yes, I think to the extent that the placement 
and the servicing of lender-placed insurance is part of the 
lending process, then I think the CFPB has the same authority 
for that as they would over any other type of mortgage 
servicing practices.
    They certainly don't have authority over insurance, but 
they--I think the Dodd-Frank Act does give them authority over 
mortgage servicing practices.
    Mr. Hurt. Okay. Thank you.
    I also wanted to thank you for what you talked about in 
terms of the importance of jobs here, because I come from the 
5th District of Virginia, where we have suffered tremendous job 
loss. And it is not--and, frankly and fortunately, it is not 
anything new, I guess, since 2008.
    And certainly, as we look to the Federal Insurance Office--
and this is a question I was hoping--I wish everyone could 
answer it, but my time is going to be limited, but I wanted Mr. 
Furgatch and Mr. Jackson, perhaps, to address this.
    To me, as I go across Virginia's 5th District, and I think 
this is true for the--if one goes across this country, small 
business is the backbone of our economy.
    And unnecessary--while regulation can be--is important--
proper regulation--I think we would probably all agree that 
unnecessary regulation adds additional cost to small business 
that either makes it impossible for them to survive or makes an 
impossible barrier to entry into the marketplace.
    And that is what, I think, consumers depend upon in terms 
of competition, and certainly depend upon those same businesses 
for their livelihoods.
    So I was wondering if Mr. Furgatch first, and then Mr. 
Jackson, could maybe talk a little bit about as you look at 
this FIO. And I think we all--I think I understand the 
importance of having this Federal Insurance Office, although I 
am very concerned that it is the proverbial nose under the 
    And then we see what happens when you create something with 
good intentions, the next thing you know, 10 years later we are 
going to have this huge, huge expansion of Federal executive 
    Could you just speak to your concerns about that future 
landscape for the people that you represent?
    Mr. Furgatch. Absolutely, and thank you for giving me that 
    The FIO can serve a very important function in the 
international arena, but we share your concerns about whether 
that mission evolves to be applied domestically in a way that 
was not intended.
    The PCI, one of the trade groups whom I am representing 
today, engaged the Ward benchmarking company, an independent 
organization, to do a study of the burden of regulatory cost on 
small businesses--of insurance companies generally.
    And what they found is from 2008 to 2010, in a 2-year 
period, there was a 38 percent increase in overhead costs 
associated with regulatory compliance for small businesses, and 
14 percent for the larger companies. Combined, it was 18 
    But since you asked about small businesses, I point out 
that the smaller businesses bear the greater brunt of more 
regulatory oversight.
    I will also take this opportunity, even though it is 
slightly off topic, to remind everyone that in the 2008 
financial crisis, over 30 percent of our thrifts failed in the 
country, and over 10 percent of our banks. But there was not 
one property casualty insurance company that failed in 2008 as 
a result of the crisis.
    So, while regulation is important and it is appropriate, I 
think it has been clearly demonstrated that as respects 
property casualty, we have a sound system with the States that 
is working. And therefore, if the FIO were to mission creep, if 
you will, it would really represent duplicative, unnecessary, 
and costly burdens, especially on the small companies.
    Mr. Hurt. I ask unanimous consent to allow Mr. Jackson to 
answer my question, if that is all right, since my time has 
    Chairwoman Biggert. Without objection, it is so ordered.
    Mr. Jackson. Thank you. And I will be very brief.
    I think with the FIO, kind of our viewpoint would be that 
it has been constrained very tightly through legislation at 
this point.
    Thinking about the small businesses and the burdensome 
things that have to happen, the State licensure, when we have a 
client that is in multiple States and agents and brokers have 
to then go through the process of being licensed in all those 
different States, that is a very time-consuming, burdensome 
    The company that I am with now, we have a department that 
handles that. In my previous life, working as an independent 
broker, so to speak--I still am, but in a much smaller shop--it 
was very time-consuming. You would have to go to outside 
resources, a very cost-consuming way of doing business. So, it 
was very burdensome to the small business owner, in particular.
    I am hoping that the NARAB approach is going to be the best 
approach for small business, too.
    Mr. Hurt. Thank you.
    Mr. Jackson. I think just as an aside, having represented--
having been a member of both these insurance organizations, the 
Big ``I'' and CIAB for over 50 years, they don't agree on all 
issues, but they were certainly championing the cause. So, I 
appreciate the question.
    Thank you.
    Mr. Hurt. Thank you.
    Chairwoman Biggert. Mr. Sherman, would you like--
    Mr. Sherman. Thank you. In all fairness--
    Chairwoman Biggert. Fine.
    The gentlelady from West Virginia--
    Mrs. Capito. Thank you, Madam Chairwoman, and I apologize 
for not being here for the witnesses' testimony.
    I just have a couple of questions.
    As you might know, I am the chair of the subcommittee on 
the banking institutions. And a lot of what we have been 
dealing with there is CFPB and this FSOC oversight.
    There are two insurance companies that are falling into 
this realm. Can you tell me which ones they are? And I think--
are they members of the Big ``I?''
    Do you know?
    Mr. Jackson. There--
    Mrs. Capito. There is no insurance company. It is going--
    Mr. Jackson. The two trade associations that I am involved 
with are the Independent Insurance Agents and Brokers and the 
Council of Insurance Agents and Brokers--
    Mrs. Capito. Okay. So--
    Ms. Pusey. Was the question are other insurers designated--
    Mrs. Capito. Yes.
    Ms. Pusey. Okay. There have been no insurers designated. I 
think there are conversations about the likelihood of certain 
types of companies, but I think there is some speculation. But 
I am unaware of any formal designation--
    Mrs. Capito. Okay.
    The provisions that came out--I guess the FSOC came out 
this week with sort of a warning shot, saying that there is 
still weakness in the system, in their opinion.
    Does that influence any of your folks in the insurance 
    Ms. Pusey. I am going to take a stab at that. And our 
understanding of the their annual report was actually, I think, 
with respect to the property casualty industry, quite an 
endorsement of our strengths, that, in fact, that we were--had 
fared well through this crisis.
    We had been stress tested, and that we were, in fact, our 
core insurance activities--and a lot of distinctions between 
the other activities in the holding company or the core 
insurance practices. And those core heavily regulated practices 
are, in fact, not likely to be deemed to be posing a risk.
    I think with respect to a broader assessment of gaps, I 
think everyone here--and you have spoken to that, too--that 
beyond insurance, I think there is a recognition that I think 
that is what the FSOC is trying to get its hands around.
    But with respect to insurance, and particularly what we 
would define as the core traditional property casualty product, 
I think there has been an increasing chorus saying that, in 
fact, that is not likely to pose the kind of risks we are 
looking at.
    Mrs. Capito. I think having a representative with great 
knowledge of insurance issues on that council probably will be 
very helpful. And I know that the President's recommendation 
has gone before the Senate. So, I think that is a good signal 
and a good sign.
    Let me ask you just a general economic question--and 
anybody can take a stab at this.
    What are you finding in terms of the pulse of your 
business? We know our unemployment is up to 9.2 percent. We 
know that the issues that we are discussing here, the debt and 
deficit issues, but the debt ceiling issues are causing fits 
and starts.
    What are you all seeing over the horizon in terms of 
growth, or expansion, or seized-up markets? I am just 
interested to see how your economists are looking at the next 
year here, and what you are seeing right at the present time.
    Mr. Furgatch. I can start off with that.
    On behalf of the property casualty insurance industry, I 
can say that it is functioning. It is functioning well. And it 
is highly competitive.
    With that having been said, the outlook and sentiment is 
not overly favorable going forward. There is still a lot of 
uncertainty and instability, in large part related to 
regulation as well as the debt situation that Congress is 
grappling with right now.
    I want to point out that we had $1 trillion of investment 
money emanating from the property casualty industry, invested 
in both government as well as privately issued securities. It 
is as easy as a point-and-click on a computer nowadays to move 
those investments out of the United States and into foreign 
currencies and overseas.
    Mrs. Capito. Has that occurred over the last--
    Mr. Furgatch. I think the larger, more sophisticated 
investment portfolios in the industry, on a standard basis, 
probably diversify by having some overseas securities.
    So, the issue is not whether it is a threshold of whether 
it leaves, but rather a sense of confidence in investing in the 
United States with the asset side of the balance sheet.
    When there is uncertainty, like what is being posed with 
the debt ceiling, it is an impetus for companies to move more 
investments into other currencies and overseas.
    And my fear is--and I speak not so much as the insurance 
carrier with this concern, but more as an American, if you 
will, is that once the infrastructure is established to move 
these assets overseas, and once that becomes a common practice, 
even if the U.S. economy rebounds, and even if the government 
demonstrates responsibility in dealing with the long-term debt 
issue, that doesn't necessarily mean that all that money comes 
    And so I think some very significant damage can be done, 
just by the uncertainty that we are all coping with.
    Mrs. Capito. I appreciate that. Thank you.
    Thank you, Madam Chairwoman.
    Chairwoman Biggert. Thank you, Ms. Capito.
    The gentleman from California, Mr. Sherman, is recognized 
for 5 minutes.
    Mr. Sherman. Thank you.
    My first question will be to Mr. Hughes. Insurance 
companies exist to assume risks that families can't assume 
themselves or don't want to.
    Life insurance is kind of misnamed, in that it is really 
death insurance. It pays when somebody dies.
    But since that name was already used, they came up with the 
term longevity insurance to insure against living too long. For 
so many of my constituents, if you ask them what is their 
economic fear, it is that they will outlive their savings.
    So, I can commend your industry for coming up with 
longevity insurance. The problem is, I don't know if any of 
your members are offering inflation-adjusted longevity 
    In the absence of inflation adjustment, longevity insurance 
doesn't achieve its purpose.
    I have talked to some in your industry who have said, 
inflation, that is a risk. We don't want to take that. In which 
case, if the insurance industry isn't in the business of taking 
risks, why do you exist?
    Have you been able to persuade any of your members to offer 
the product that so many people in this country--they don't 
describe it this way.
    The fear is, I will outlive my savings. The more 
sophisticated fear is, I will outlive my savings, or there will 
be a lot of inflation, and I will outlive my savings.
    Any of your members offering longevity insurance that is 
inflation adjusted?
    Mr. Hughes. I think I would answer that question by saying 
the business of life insurance companies is really in two 
primary areas, life insurance and annuities. And it is the 
annuity product that is the product--
    Mr. Sherman. Yes. Okay, are you offering--
    Mr. Hughes. --with your assets. And variable annuity is 
designed as a hedge against inflation.
    Mr. Sherman. But that is not a guarantee against inflation, 
that is dependent upon the success of the U.S. stock market. 
Obviously, longevity insurance is an annuity and I am glad your 
industry offers an annuity.
    It is fine that you have a product that is keyed to the 
U.S. stock market, but that is hardly assurance that when a 
person lives beyond what used to be considered a ripe old age, 
that they will actually be able to buy groceries.
    Mr. Hughes. Well, if--
    Mr. Sherman. I am not so sure the U.S. stock market is--in 
any case, are any of your companies offering inflation-adjusted 
annuities that start at age 80 or age 85?
    Mr. Hughes. You know--
    Mr. Sherman. I know you will get back to me for the record, 
and I thank you for your patience with my question.
    And then--but the follow-up question will be this--if your 
first answer is no, then for the record, please say what does 
Congress have to do to get you folks to offer a product--and 
you can't say people won't buy it, because they will if they 
understand it.
    It won't look as attractive as your other products, because 
you are--obviously an inflation-adjusted annuity is a smaller 
dollar amount adjusted for inflation, may turn out to be a 
bigger dollar amount come 20 or 30 years from now or 40 years 
from now.
    So, my first question for the record is--are your companies 
offering inflation-adjusted longevity insurance. And second, if 
not, why not; and third, what does Congress have to do to 
change the answer to the first question? And I--
    Mr. Hughes. My interpretation--
    Mr. Sherman. --since you had no reason to think that I 
would be asking this question--
    Mr. Hughes. No, I had--
    Mr. Sherman. --I have no reason to expect an off-the-cuff 
    Now, let me shift to Ms. Heaton.
    And this, I think, may be a question you would expect, 
because we have the Nonadmitted Multi-State Agreement.
    Some have said this agreement would create new regulatory 
burdens that did not exist previously to the Nonadmitted 
Reinsurance Reform Act. And that the agreement really isn't 
based on existing data.
    What do you think of the agreement?
    Ms. Heaton. I am sorry, I didn't hear--
    Mr. Sherman. What do you think of the Nonadmitted Multi-
State Agreement?
    Ms. Heaton. I think perhaps you weren't with us at the 
time, but Kentucky and SLIMPACT have proposed compacts--
interstate compacts that we think reflect the spirit of NRRA in 
that they are consistent amongst the States, making a one-State 
filing process available to brokers and the companies that 
support the sale of our insurance.
    And we think that is a better solution than what has been 
previously proposed by NIMA and the NAIC.
    Earlier today, we saw NCOIL and NAIC hug on this table, so 
we are highly optimistic that our differences will get 
    Mr. Sherman. I don't know that I am happy or unhappy not to 
see whatever happened on that table happen. I am sure you are--
this was figurative hugging or literal?
    Ms. Heaton. No, literally, they hugged, and they said they 
would be hugging out in the hall, too. So, we are very 
optimistic that this will get resolved.
    Mr. Sherman. C-SPAN ratings will improve.
    Ms. Heaton. Yes.
    Mr. Sherman. I thank you for your answer, and like my 
colleague, regret that I wasn't here earlier in the hearing, 
and I yield back.
    Chairwoman Biggert. Thank you, Mr. Sherman.
    Mr. Smith, I am going to recognize myself to ask another 
    In your testimony on behalf of RAA and Swiss Re, you have 
attached some research from the RAA on the question of systemic 
risk and the reinsurance business.
    We also know that FSOC has announced that it expects to 
release additional guidance regarding the criteria that the 
FSOC may use to determine if a business is a SIFI.
    Knowing this, could you summarize the conclusion of the 
research that you have on this matter?
    Mr. Smith. Yes. Thank you.
    The general finding of the research is that reinsurers and 
reinsurance, they are not the source of systemic risk. But the 
additional thought--I know it has been brought up numerous 
times this morning--we must look at the activities of entities, 
not their size.
    It is all about the activities. It is all about leverage. 
That is the key.
    Chairwoman Biggert. Great. Thank you. That was a quick 
    Mr. Hughes?
    I understand that various segments of the insurance 
industry are very concerned with the Department of Labor's 
recent proposal regulation which would change who would be a 
fiduciary. It is a duty of a--fiduciary for the purpose of 
giving investment advice.
    A number of stakeholders have said that this regulation 
should be withdrawn and re-proposed. How could the proposed 
deal or rule impact the insurance industry and consumers?
    Mr. Hughes. First, we would certainly like to thank you for 
your involvement in that issue. It has been very helpful and 
much appreciated.
    The concern we have is that the Department of Labor 
proposed the rule. There really wasn't any demonstrated need, 
at least that we saw in the proposal.
    And the problem that we see is it is going to drive up the 
cost of valuable advice to plan participants and IRA holders, 
and limit the ability of that investment advice.
    As you have noted, the process we think can only be cured 
by re-proposing the rule. And in terms of timing, it has been a 
bit frustrating to see the SEC looking at its own issues of 
harmonizing the standards for broker dealers and investment 
advisors. And that is going to be a fiduciary standard, and the 
Department of Labor not coordinating their effort at all with 
the SEC.
    So we think in terms of timing, in terms of substance and 
in terms of process, a re-proposal of the rule is the only way 
to really handle that issue appropriately.
    Chairwoman Biggert. Thank you.
    I know that we tried to make sure that the two agencies are 
working together. Maybe we could get them to hug, too. I don't 
    But I think it is a very important issue. And it really 
does concern us. I think that there will be a conflict between 
these. And this is a very important issue. So thank you.
    With that, seeing no one else here, I will thank the panel 
and note that some members may have additional questions for 
this panel, which they may wish to submit in writing. Without 
objection, the hearing record will remain open for 30 days for 
members to submit written questions to these witnesses and to 
place their responses in the record.
    And I would really like, again, to thank the witnesses for 
joining us today.
    I would also like to announce that we plan to hold a 
similar insurance oversight hearing in the fall to hear from 
the new FIO Director and perhaps other Federal regulators on 
many of the topics that were discussed today. And I hope that 
Mr. McRaith will be able to be here and will have finished his 
orientation by that time.
    So again, thank you so much for being here.
    And with that, this hearing is adjourned.
    [Whereupon, at 12:29 p.m., the hearing was adjourned.]

                            A P P E N D I X

                             July 28, 2011