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




 
                        INSURANCE OVERSIGHT AND
                         LEGISLATIVE PROPOSALS

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                         INSURANCE, HOUSING AND
                         COMMUNITY OPPORTUNITY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 16, 2011

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 112-84



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                   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
SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey            RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas              WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina   CAROLYN McCARTHY, New York
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
LYNN A. WESTMORELAND, Georgia        ED PERLMUTTER, Colorado
BLAINE LUETKEMEYER, Missouri         JOE DONNELLY, Indiana
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 HURT, Virginia
ROBERT J. DOLD, Illinois
DAVID SCHWEIKERT, Arizona
MICHAEL G. GRIMM, New York
FRANCISCO ``QUICO'' CANSECO, Texas
STEVE STIVERS, Ohio
STEPHEN LEE FINCHER, Tennessee

                   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
SHELLEY MOORE CAPITO, West Virginia  NYDIA M. VELAZQUEZ, New York
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
STEVE STIVERS, Ohio


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    November 16, 2011............................................     1
Appendix:
    November 16, 2011............................................    29

                               WITNESSES
                      Wednesday, November 16, 2011

Lanza, Michael H., Executive Vice President and General Counsel, 
  Selective Insurance Group, Inc., on behalf of the Property 
  Casualty Insurers Association of America (PCI).................    10
Monroe, Steven M., Chief Compliance Officer, U.S. & Canada, for 
  Marsh, Inc., on behalf of the Council of Insurance Agents & 
  Brokers........................................................    11
Schwarcz, Daniel, Associate Professor, University of Minnesota 
  Law School.....................................................    13
Torti, Joseph III, Deputy Director and Superintendent of 
  Insurance and Banking, Rhode Island Department of Business 
  Regulation, on behalf of the National Association of Insurance 
  Commissioners (NAIC)...........................................     3

                                APPENDIX

Prepared statements:
    Lanza, Michael H.............................................    30
    Monroe, Steven M.............................................    37
    Schwarcz, Daniel.............................................    53
    Torti, Joseph III............................................    63

              Additional Material Submitted for the Record

Biggert, Hon. Judy:
    Written statement of the Independent Insurance Agents & 
      Brokers of America.........................................    89
    Letter from the National Association of Mutual Insurance 
      Companies..................................................    91
    Letter from the National Association of Professional Surplus 
      Lines Offices, Ltd.........................................    94
    Letter from Nationwide Mutual Insurance Company..............    95
    Written statement of the National Conference of Insurance 
      Guaranty Funds.............................................    96
    Letter from the National Conference of Insurance Legislators.   103
    Written statement of the National Organization of Life and 
      Health Insurance Guaranty Association......................   105
    Letter from the Risk and Insurance Management Society, Inc...   123
Dold, Hon. Robert:
    Written responses to questions submitted to Joseph Torti.....   125


                        INSURANCE OVERSIGHT AND
                         LEGISLATIVE PROPOSALS

                              ----------                              


                      Wednesday, November 16, 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 10:04 a.m., in 
room 2128, Rayburn House Office Building, Hon. Judy Biggert 
[chairwoman of the subcommittee] presiding.
    Members present: Representatives Biggert, Hurt, McHenry, 
Westmoreland, Duffy, Stivers; Velazquez, Sherman, and Capuano.
    Also present: Representatives Green and Moore.
    Chairwoman Biggert. The Subcommittee on Insurance, Housing 
and Community Opportunity will come to order. I hope that we 
will have some more Members. Maybe it is a rainy day, and it is 
taking some time to get here. Without objection, all Members' 
opening statements will be made a part of the record, and I 
will begin.
    Good morning, everyone, and welcome to this hearing. This 
is the third in a series. I welcome today's witnesses. Today, 
the subcommittee will examine insurance regulation and three 
discussion draft legislative proposals. These draft proposals 
amend provisions in the Dodd-Frank Act in Titles I, II, and V, 
and specifically address: one, the authority of Federal 
entities to collect data from insurers; two, the FDIC's Orderly 
Liquidation Authority (OLA) as it relates to insurance 
companies; and three, the Federal Reserve's authority to 
potentially subject some insurers to heightened prudential 
standards.
    Regulatory uncertainty created by the Dodd-Frank Act has 
unnecessarily extended into the U.S. insurance market in ways 
that will raise costs for consumers, harm businesses, and 
weaken job growth. I say ``unnecessarily'' because as I have 
said many times before, for over 150 years the State-based 
system of insurance regulation has worked and endured, even 
during turbulent economic times. It has allowed the U.S. 
insurance industry to become a growing and vibrant source of 
financial security for millions of Americans. It has allowed 
one sector of our economy to provide 2.3 million wage and 
salary jobs. 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.
    Unfortunately, certain provisions of the Dodd-Frank Act 
have intentionally or unintentionally upset this well-
functioning, proven system of regulation. This subcommittee has 
heard from many witnesses and stakeholders to that end. 
Insurers have said that they are not expanding their companies 
and creating jobs, consumer costs may rise, and they may become 
less competitive abroad.
    And finally, I would like to express my sincere 
disappointment that representatives from the Federal Reserve 
and the FDIC decided not to testify at today's hearing, which 
is addressing significant provisions of the Dodd-Frank Act that 
their agencies are primarily responsible for implementing.
    With that, I welcome input from all members of the 
committee on these discussion drafts, and I would yield to 
someone on the other side, but they are not here.
    Mr. Westmoreland, would you like to give your opening 
statement now? You are recognized for 2 minutes.
    Mr. Westmoreland. Thank you, Chairwoman Biggert, for 
holding this hearing.
    Since Dodd-Frank passed, all we have seen is the 
uncertainty and the harm this law has brought to working 
Americans and small businesses. The proposals before the 
committee today are much needed to help insurance companies get 
out from under Uncle Sam and allow States to continue their 
long-standing insurance regulation.
    Like the chairwoman, I, too, have serious concerns that the 
FDIC and the Federal Reserve refused to testify at today's 
hearing. When Congress asks an agency to testify, I think they 
should come, period. So my question to the FDIC and the Federal 
Reserve is, what are you hiding or what are you ashamed to 
testify to?
    I urge the chairwoman to hold another hearing and mandate 
the FDIC and the Federal Reserve to attend so that we can find 
out what they have to say about this issue, and with that, 
Madam Chairwoman, I yield back.
    Chairwoman Biggert. The gentleman yields back, and we will 
take that under advisement. Thank you. The gentleman from 
Virginia, the vice chair, is recognized for 1 minute.
    Mr. Hurt. Thank you. Thank you, Madam Chairwoman. I want to 
thank you for your leadership on issues relating to the 
business of insurance.
    Today marks the third in a series of hearings that this 
subcommittee has held to assess the impact of the Dodd-Frank 
Act on insurers. As we have seen, Dodd-Frank contains a number 
of provisions that impose unnecessary duplicative regulatory 
burdens on insurers that have the potential to harm both the 
industry and consumers. We must be mindful of the cumulative 
effect of adding new Federal regulatory requirements to 
existing State insurance regulatory schemes. Witnesses at our 
previous hearings have demonstrated that excessive and 
unnecessary regulation of insurance will only restrict consumer 
choice, inhibit the growth of free and open insurance markets, 
and drive up costs on consumers in my district, Virginia's 
Fifth District, and across the country.
    The discussion drafts we are examining today take steps to 
alleviate these regulatory burdens by proposing commonsense 
reforms that reduce duplication without sacrificing consumer 
protection or increasing systemic risk.
    Again, I want to thank the Chair for holding this hearing. 
I look forward to our witnesses' perspectives on the draft 
legislation, and I yield back my time.
    Chairwoman Biggert. Thank you. The gentleman from Texas, 
Mr. Green, do you have an opening statement?
    Mr. Green. Madam Chairwoman, thank you so very much. I will 
pass at this time, and I look forward to hearing the testimony. 
Thank you.
    Chairwoman Biggert. With that, we have two panels today. 
For our first panel, we are happy to have Mr. Joseph Torti, 
deputy director and superintendent of insurance and banking, 
Division of Insurance, Department of Business Regulation, State 
of Rhode Island, on behalf of the NAIC, the National 
Association of Insurance Commissioners. Thank you so much for 
being here.
    Without objection, your written statement will be made a 
part of the record, and you are now recognized for a 5-minute 
summary of your testimony.

      STATEMENT OF JOSEPH TORTI III, DEPUTY DIRECTOR AND 
     SUPERINTENDENT OF INSURANCE AND BANKING, RHODE ISLAND 
 DEPARTMENT OF BUSINESS REGULATION, ON BEHALF OF THE NATIONAL 
         ASSOCIATION OF INSURANCE COMMISSIONERS (NAIC)

    Mr. Torti. Thank you for the opportunity to testify today. 
My name is Joseph Torti, and I am superintendent of insurance 
for Rhode Island. I present this testimony on behalf of the 
NAIC. To be clear, the NAIC has no position on the Dodd-Frank 
Act or any current legislative proposals to modify it.
    Today, I will cover the unique characteristics of 
insurance, an overview of the key aspects of insurance 
regulation, and the NAIC's efforts in working with Federal 
agencies as they implement Dodd-Frank.
    Insurance products are fundamentally different from other 
financial products. The very nature of insurance significantly 
reduces the potential of a run-on-the-bank scenario. 
Importantly, insurance products do not transform short-term 
liabilities into longer term assets. A key reason many other 
financial firms suffered during the financial crisis was that 
the duration of their assets and liabilities were not matched.
    The insurance regulatory framework's fundamental tenet is 
to protect an insurer's ability to pay policyholder claims. 
Regulators have broad authority to identify and address issues 
before they become a threat to solvency. The foundation of this 
system is the detailed and transparent reporting requirements. 
Insurers are required to prepare comprehensive financial 
statements using the NAIC's statutory accounting principles, or 
SAP. SAP utilizes the framework established by GAAP, but unlike 
GAAP, which is primarily designed to provide key information to 
investors of public companies, SAP is designed to assist 
regulators in monitoring the solvency of an insurer.
    Financial statements are filed with the NAIC on a quarterly 
and an annual basis. The NAIC serves as the regulators' 
centralized repository for this data, and this capability has 
been cited by the IMF as world leading. We utilize this 
information as part of our intensive financial analysis. The 
NAIC also compiles the information to advise us of trends in 
the insurance sector and the impact of external events. The 
information is also used in our risk-based capital framework. 
This framework requires an insurer to hold at least a minimum 
amount of capital based on the risks on its balance sheet. The 
framework also includes authority for successive levels of 
regulatory intervention.
    In the unlikely event that an insurer becomes troubled, 
State receivership laws provide regulators authorities to 
prevent insolvencies and to provide protection to 
policyholders. In 2004, we utilized our broad authority in 
Rhode Island to place a troubled insurer into rehabilitation, 
preventing its insolvency while ensuring full payment to 
policyholders.
    In an insolvency, State laws give policyholders priority 
over most creditors. In cases where the assets of an insurer 
are insufficient to pay claims, the States have guaranty funds 
to serve as a backstop for most insurance products. Together, 
receivership laws and the guarantee funds ensure that 
policyholders are protected and troubled insurance companies 
are resolved in an orderly manner.
    The NAIC has a long history of working closely with the 
Federal agencies, and this has continued during Dodd-Frank 
implementation. State insurance regulators are represented on 
FSOC through John Huff, the Missouri director of insurance. In 
the recently released FSOC guidance, we were pleased to see a 
commitment to involve regulators of any insurance companies 
under consideration early in the process. We are currently 
reviewing the guidance and will provide our comments through 
Director Huff. We also continue to encourage the FSOC to enable 
Director Huff to consult with us regarding other aspects of its 
work that could impact insurance.
    The NAIC has also been engaged in the implementation of the 
FDIC's new resolution authority. We have met with the FDIC and 
commented on proposals regarding the circumstances in which the 
FDIC can take a lien on insurance company assets. We also 
requested that the FDIC allow for the resolution of any mutual 
insurance holding companies pursuant to State laws. The NAIC's 
coordination with the FDIC will be critical to ensuring that 
policyholders are protected.
    Our strong relationship with the Federal Reserve has grown 
since the passage of Dodd-Frank. Insurance regulators are 
meeting with Federal Reserve representatives to exchange 
information and to discuss how we will work together as it 
implements its new authorities.
    The NAIC also continues to engage directly with the FIO as 
it takes shape. FIO has a critical role to play in 
international matters. The NAIC will continue to serve as the 
voice of insurance regulators on these key issues, but the 
voice of the U.S. Government is essential, so we look forward 
to partnering with the FIO in demonstrating a united front 
whenever possible. Dodd-Frank requires the FIO to issue a 
report on insurance regulation by January 2012. State insurance 
regulation has been subject to Federal scrutiny many times 
before, focusing primarily on the perceived costs and 
redundancy of the system. Rarely have these issues been weighed 
against the strength of our system's checks and balances that 
help the insurance sector weather the financial crisis far 
better than others. We look forward to meeting directly with 
the FIO to encourage a balanced view as it finalizes its study.
    In conclusion, the NAIC continues to advocate that the 
unique nature of insurance and its strong system of regulation 
be recognized. We look forward to continuing to work with you 
and our fellow financial regulators. Thank you, and I look 
forward to your questions.
    [The prepared statement of Superintendent Torti can be 
found on page 63 of the appendix.]
    Chairwoman Biggert. Thank you so much, and with that we are 
going to move to the questions. Members will have 5 minutes 
each to ask questions, and I will begin with myself and yield 
myself 5 minutes.
    Mr. Torti, during the subcommittee's October 25th hearing 
with regard to the Federal Insurance Office (FIO) authority 
under the Dodd-Frank Act to issue a subpoena to collect data 
directly from an insurance company, FIO Director McRaith said 
that the possibility of actually issuing a subpoena to collect 
information is extremely unlikely.
    Can you envision any scenario where the FIO or the Office 
of Financial Research would need to issue a subpoena to collect 
data directly from an insurance company aside from the data 
that can be secured from State regulators, public sources, or 
any other entity? What kind of data would the FIO or the OFR 
need to collect?
    Mr. Torti. What I can say about that is that we, as State 
regulators, collect an extensive amount of data on insurance 
companies. We have every piece of financial data that is 
necessary to regulate these companies, and I can't really 
envision a scenario where the Federal regulators may need 
something regarding the financial condition of an insurance 
company that we don't already have, and we are very happy to 
share any of that information. Anytime we have been requested 
to provide information to any of the Federal agencies, we have 
done so without hesitation.
    Chairwoman Biggert. Thank you. And then on page 8 of your 
written testimony, you state that regulators have requested 
that the FDIC allow for the resolution of any mutual insurance 
holding company pursuant to State insurance receivership laws 
as the statute is unclear in this regard. The discussion draft 
number 2 under consideration by the subcommittee today aims to 
provide this clarity with regard to mutual insurance holding 
companies.
    Do you think that the Dodd-Frank Act lacks clarity about 
whether they are covered by the insurance company definition 
for purposes of the FDIC's Orderly Liquidation Authority?
    Mr. Torti. We do think that the intent of the legislation 
is clear and that it is not intended that mutual insurance 
holding companies be subject to the resolution authority of the 
FDIC, and we have been working with the FDIC, we have had 
several conference calls with the FDIC, and we met with them as 
recently as early November, just before the recent NAIC meeting 
in National Harbor, Maryland. So we have worked very closely 
with them, and we are hopeful that any rule that comes out will 
clarify that mutual insurance holding companies--
    Chairwoman Biggert. Can you elaborate on why State 
regulators have requested that the States resolve a failed 
mutual insurance holding company?
    Mr. Torti. Right now, under the State laws regarding 
receivership, mutual insurance holding companies are included 
in the receivership estate, so the assets of the mutual 
insurance holding company are available for the policyholders 
and claimants of that insurance company in that receivership. 
So it is important that that holding company be resolved in 
accordance with the State insurance receivership laws in order 
to protect those policyholders.
    Chairwoman Biggert. Okay. So you would say that the States 
are better equipped and experienced to be able to resolve the 
matter?
    Mr. Torti. I would say that the States are well equipped to 
resolve insurance company matters.
    Chairwoman Biggert. Okay. Then, thirdly, why can't a bank 
model for regulation work for insurance companies? Is there a 
difference in the way that State insurance regulators establish 
leverage and risk-based capital requirements for insurance 
companies as compared to the way that the Federal bank 
regulators establish leverage and risk?
    Mr. Torti. Banking products and insurance products are very 
different. Insurance policyholders pay a premium, and insurers 
make a promise to pay in the future. It is much different, 
especially in the property and casualty area, than a financial 
product that might be offered by a banking institution. The 
chance of a run-on-the-bank type scenario with an insurance 
entity is much less than with a banking entity. The liabilities 
and assets are appropriately matched in insurers. If a company 
is selling long-term type insurance, they match their assets 
with that long-term insurance. That is one of the key things 
that insurance companies do and that regulators ensure is done 
appropriately, especially in the area of life insurance.
    So, they are very different products. There is a very 
different regulatory standard, and we believe that we 
appropriately regulate insurers.
    Chairwoman Biggert. Thank you. My time has expired. The 
gentleman from Texas is recognized for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman, and I thank the 
witness for testifying. As you know, we had great difficulty 
with some of the ``too-big-to-fail'' institutions when we were 
going through the financial crisis. One such institution was 
AIG. It had financial components, but there were also many 
other things that were contained within the network that AIG 
had. In fact, there are some who contend that AIG may have been 
the glue that was holding everything together simply because 
they were so vast and so pervasive in the institutions that 
they covered.
    My question to you has to do with Orderly Liquidation 
Authority. The Orderly Liquidation Authority that we have in 
Dodd-Frank allows the FDIC to intervene and to do what is 
necessary under exigent circumstances, I would consider it 
exigent circumstances. I think what happened with AIG was under 
exigent circumstances. How would this occur differently today 
if we had--God forbid, and I would never want it--another AIG 
to contend with?
    Mr. Torti. I hope I understand your question. Are you 
saying as a result of the Dodd-Frank changes that have been 
made, what would be done differently?
    Mr. Green. How would the States respond to the FDIC 
handling exigent circumstances comparable to AIG during the 
financial crisis?
    Mr. Torti. The traditional way that we would handle that 
type of thing is we try to create a wall around the insurance 
entity to protect the insurance entity and the insurance 
entity's policyholders from those circumstances so that the 
insurance policyholders and claimants aren't made to pay for 
the problems outside the insurance entity. That is normally the 
way that we protect an insurance entity in a receivership 
situation. So if there were a holding company issue or a 
significant affiliate outside of the insurance entity that had 
financial difficulties, we would protect the insurer from those 
financial difficulties through the current receivership laws 
that we have in all the States.
    Mr. Green. In essence, are you saying that you would be 
able to work within the confines of Dodd-Frank and with the 
FDIC so as to perfect an orderly liquidation?
    Mr. Torti. We really hope we don't end up in that situation 
again.
    Mr. Green. Obviously, yes, I concur.
    Mr. Torti. But, yes, we believe we should be able to work 
with the FDIC. We are hopeful that we will be able to work with 
the FDIC. We have a very good relationship with the FDIC. The 
FDIC has acknowledged that protection of the policyholders and 
claimants of the insurance entity is of utmost importance to 
us, and we believe that we should be able to work with them on 
that type of circumstance.
    Mr. Green. Are there any technical changes to the draft we 
have that you would recommend to help to facilitate this?
    Mr. Torti. I can't think of any technical changes that I 
would offer to the current draft that you have, no.
    Mr. Green. Thank you, Madam Chairwoman. I will yield back.
    Chairwoman Biggert. The gentleman from Virginia, Mr. Hurt, 
is recognized for 5 minutes.
    Mr. Hurt. Thank you for your testimony today. We have heard 
from the FIO Director, as you know, and certainly some of the 
concerns that come to my mind as we look at the defining role 
that office will play, clearly having more information is a 
good thing, it seems to me, to help the regulators have a ``big 
picture'' view of systemic risk and how that ultimately affects 
the taxpayer. I do have some concerns, though, about the 
proverbial ``camel's nose under the tent,'' and I was wondering 
if you could speak to that. Obviously, I think of it from two 
standpoints. One is what is the worst case scenario if we have 
this authority and suddenly it grows and grows and grows, and 
the next thing you know you have Federal regulations competing, 
Federal regulatory structure competing with the State 
regulatory structure. It seems by all accounts to be very 
successful. I think you have spoken to that. But it is hard for 
me to look at the examples we have here in Washington where 
Washington has restrained itself. It is very hard to see any 
examples of that, and so I guess that is a concern for me. I 
was wondering if you could speak to that, and then also maybe 
speak to the issue of the data collection because clearly the 
State regulators will cooperate fully, and I don't have any 
concern about that, but I can see how if there is an additional 
burden for data collection put on the insurers that suddenly, 
the cumulative effect makes it more and more expensive to do 
business, and those costs get passed on to the consumer.
    So I was wondering if you could just speak generally to 
those two things, and I again thank you for your testimony.
    Mr. Torti. Sure, and I thank you all for your support of 
the State system and your kind remarks on how well the State 
system does work. We are very proud of the system, and we think 
it does work well to protect policyholders and claimants.
    With respect to the FIO and the ``nose under the tent'' 
issue, I think Dodd-Frank is very clear that the FIO is not an 
insurance regulator, and I think Director McRaith has 
acknowledged that the FIO is not an insurance regulator, so I 
can't say that I am not worried that eventually someone might 
try to, I guess, compete with the State system of regulation, 
but I don't--we have not had any indication from the FIO or any 
of the other Federal agencies that they would do anything 
inconsistent with the State system of regulation or anything 
that would in any way interfere with the current regulatory 
system the way it is now.
    With respect to data collection, we do have very robust 
data collection, and we do extensive analysis of that data. It 
allows our examiners to do constant financial analysis of every 
insurance company out there. The statements are hundreds of 
pages. You can get details of any securities that are on the 
statements of any insurance company that files an NAIC 
statutory blank. There are details on reinsurance that are 
extensive. There are details on loss reserves that are 
extremely extensive. I cannot think of any information 
regarding the individual insurance entities or financial 
information that we don't have in our world class database, so 
I would hope that it would not be necessary to request any 
information at all directly from insurers that we don't have. 
It is very clear that we have anything that--over the 150 or so 
years that we have regulated insurance, I think we have 
developed a system that captures everything you could possibly 
need to regulate these entities.
    Mr. Hurt. Thank you, and thank you, Madam Chairwoman, I 
yield back my time.
    Chairwoman Biggert. The Chair recognizes the gentlelady 
from New York, Ms. Velazquez, for 5 minutes.
    Ms. Velazquez. Thank you, Madam Chairwoman. Mr. Torti, 
regulation of the insurance industry takes place primarily at 
the State level, but as we learned from the collapse of AIG, 
large firms can become systematically important and accelerate 
the collapse of the financial system.
    In your opinion, does any one State have the resources to 
monitor and protect the whole country from systematically 
important insurance companies?
    Mr. Torti. Let me just answer that by saying it is hard to 
imagine the insurance enterprise, the insurance company itself 
posing a systemic risk. Just the way that insurance--
    Ms. Velazquez. It is hard to imagine?
    Mr. Torti. The insurance business itself. There could be 
entities, as we saw in AIG, outside the insurance enterprise 
that may pose a systemic risk, but the business of insurance is 
a little different than that. It is very hard to imagine that a 
single insurance company could pose a systemic risk. What 
happens at one insurance company usually does not carry over to 
the next insurance company. There is a promise to pay in the 
future that an insurer makes, and it is very difficult to 
imagine something that could occur.
    Ms. Velazquez. So you are telling me that the collapse of 
AIG didn't send shock waves throughout the--
    Mr. Torti. It absolutely did send shock waves, but that was 
the financial services division of AIG that did collapse.
    Ms. Velazquez. So you don't see any role for the Federal 
Government at all in terms of having to deal again with a 
collapse like AIG to prevent a direct effect across-the-board 
throughout the insurance system?
    Mr. Torti. I did not mean to imply that there was no role 
for the Federal Government.
    Ms. Velazquez. Okay.
    Mr. Torti. What I did mean to say is that insurance 
regulators, State insurance regulators are fully capable of 
regulating insurance enterprises. There may be--I am sorry.
    Ms. Velazquez. Okay, thank you. Mr. Torti, discussion draft 
number 2 will prohibit the FDIC from obtaining a lien on a 
failed insurance company's assets without the written consent 
of the company's State regulator. How are taxpayers and the 
public better protected by forcing the FDIC to seek permission 
from State regulators during the orderly dissolution of a 
failed firm?
    Mr. Torti. First of all, I want to make clear the NAIC does 
not take a position on any of the pieces of legislation. 
However, the job of the State regulator is to ensure that the 
policyholders and claimants of that insurance enterprise are 
protected, and if we are not able to have any type of say in 
what happens to those policyholders and claimants of the 
insurance enterprise, and the State scheme of regulation 
includes receivership laws that are intended to protect 
policyholders of that insurance enterprise, we just need to 
preserve that role as the regulator of insurers in order to 
protect those policyholders.
    Ms. Velazquez. Okay. Thank you, Madam Chairwoman.
    Chairwoman Biggert. Thank you. Just for the record, Mr. 
Torti, wasn't AIG's holding company a thrift?
    Mr. Torti. It was, and it was actually regulated by the 
Office of Thrift Supervision, yes. It was not an insurance 
entity.
    Chairwoman Biggert. Thank you. I see no further questions, 
and so we would thank you for your testimony, and thank you for 
being here. The Chair notes that some Members may have 
additional questions for you 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 you and 
to place your responses in the record. Thank you so much.
    Mr. Torti. Thank you very much.
    Chairwoman Biggert. And with that, I will call up the next 
panel. Thank you all for being here.
    I would like to welcome the second panel. We have today: 
Mr. Michael Lanza, EVP and general counsel, Selective Insurance 
Group, on behalf of the Property Casualty Insurers Association 
of America; Mr. Daniel Schwarcz, associate professor, 
University of Minnesota Law School; and Mr. Steven Monroe, 
chief compliance officer, U.S. and Canada, for Marsh, 
Incorporated, on behalf of the Council of Insurance Agents and 
Brokers.
    I seem to have mixed up the names, but we will proceed with 
Mr. Michael Lanza. You are recognized for 5 minutes for your 
testimony.

  STATEMENT OF MICHAEL H. LANZA, EXECUTIVE VICE PRESIDENT AND 
GENERAL COUNSEL, SELECTIVE INSURANCE GROUP, INC., ON BEHALF OF 
  THE PROPERTY CASUALTY INSURERS ASSOCIATION OF AMERICA (PCI)

    Mr. Lanza. Thank you. Chairwoman Biggert, and subcommittee 
members, thank you for the invitation to testify. I am Michael 
Lanza, executive vice president and general counsel of 
Selective Insurance Group. Selective is an insurance holding 
company with seven property and casualty insurance 
subsidiaries. I am also testifying on behalf of the Property 
Casualty Insurers Association of America, which has over a 
thousand members and the broadest membership of any national 
insurance trade association.
    Selective and PCI strongly support the discussion drafts 
you are considering to clarify the treatment of insurers under 
various provisions of the Dodd-Frank Act. Home, auto, and 
business insurers did not cause the financial crisis and are 
not systemically important to the financial markets.
    There are five key reasons why P/C insurers are not 
systemically risky: one, they have low financial leverage; two, 
they are not highly connected with other financial firms; 
three, they are in a highly competitive market with low 
individual company market penetration; four, they have low 
failure rates and, through State guaranty funds, have their own 
effective resolution authority; and five, and most importantly, 
P/C insurers do not sell products that can result in a run on 
the bank.
    In Dodd-Frank, Congress generally recognized the 
distinctions between non-risky P/C insurers and other types of 
financial firms that can pose systemic risk. Some fine tuning 
needs to be done to make those distinctions even clearer. That 
is why Selective and PCI support the proposed amendments. We do 
not believe that the proposals in any way scale back any powers 
that Dodd-Frank granted Federal agencies to regulate the types 
of risky activities that gave rise to the financial crisis.
    The discussion drafts propose technical amendments that 
clarify Dodd-Frank's application to insurers. These changes 
will reduce the potential for unintended intrusions on State 
regulatory authority and other unintended consequences.
    I want to comment in particular on four areas that the 
discussion drafts address. First, we are concerned that Dodd-
Frank's provisions ensure the confidentiality of nonpublic 
information provided to the Federal Insurance Office, but they 
may not protect that information when the FIO shares it with 
other agencies such as the Office of Financial Research or the 
Financial Stability Oversight Council. The discussion drafts 
tightens those provisions so information will not lose its 
confidentiality when it is shared with various agencies and 
regulators.
    Second, Dodd-Frank gave the FIO subpoena powers that are 
much broader than those of other Treasury agencies. Typically, 
Federal agencies have subpoena power to further their primary 
regulatory role in conducting formal administrative proceedings 
or civil, criminal or Inspector General investigations. FIO, 
however, does not have a primary regulatory role. That remains 
with the States. FIO does not need subpoena power when State 
regulators already have that power.
    Moreover, Dodd-Frank requires the FIO to get information 
from State regulators. We believe State regulators and the FIO 
can and will work together cooperatively and successfully to 
obtain needed information. By giving FIO, a non-regulator, 
subpoena powers duplicating the principal State regulators, 
there is a significant likelihood of redundant, costly, and 
burdensome data calls, and those costs will ultimately be borne 
by consumers.
    Third, Dodd-Frank gives Federal regulators the power to 
resolve failing financial companies. P/C insurers, however, are 
already subject to State insolvency mechanisms, including 
guaranty funds that protect the consumers. Dodd-Frank permits 
the FDIC to take a lien on the assets of financial companies, 
but it does not exempt insurance companies. The discussion 
drafts requires the written consent of the insurer's 
domiciliary regulator before the FDIC can place a lien on 
insurer assets. This ensures that insurer assets cannot be used 
to shore up non-insurance affiliates, only policyholders. Dodd-
Frank also gives the FDIC the ability to assess insurers for 
the resolution costs of non-insurance financial firms. This 
provision creates inequity between insurers and non-insurers 
and leads to the possibility that insurers could be doubly 
assessed. The discussion draft addresses this inequity.
    Finally, Dodd-Frank gives the Federal Reserve the power to 
impose heightened prudential standards on firms that are found 
to be systemically important. The discussion draft requires the 
Federal Reserve to take into account State insurance regulatory 
and accounting procedures, including risk-based capital, and 
prevents regulatory conflicts between the Fed and the States.
    For these reasons, we strongly urge that these discussion 
drafts be introduced and adopted. Thank you.
    [The prepared statement of Mr. Lanza can be found on page 
30 of the appendix.]
    Chairwoman Biggert. Thank you, Mr. Lanza. Mr. Monroe, you 
are recognized for 5 minutes.

STATEMENT OF STEVEN M. MONROE, CHIEF COMPLIANCE OFFICER, U.S. & 
CANADA, FOR MARSH, INC., ON BEHALF OF THE COUNCIL OF INSURANCE 
                        AGENTS & BROKERS

    Mr. Monroe. Good morning. I am Steve Monroe, chief 
compliance officer for Marsh in the U.S. and Canada, on behalf 
of the Council of Insurance Agents and Brokers, which 
represents the Nation's leading insurance agencies and brokers, 
including Marsh. I would like to thank you for the opportunity 
to address the implementation of the insurance provisions of 
Dodd-Frank.
    Council members employ more than 120,000 people and 
annually place more than 80 percent, over $200 billion, of all 
U.S. products and services. Marsh, a unit of Marsh & McLennan 
Companies, is the world's leading insurance broker and risk 
adviser, with over 25,000 employees in over 100 countries. My 
written statement has addressed why the Council supports the 
legislation that will clarify the intent of Congress in 
enacting Dodd-Frank, but excluding the insurance sector from 
the FDIC resolution authority and from the so-called Volcker 
Rule.
    I will focus the remainder of my statement on the States' 
implementation of the Dodd-Frank reforms known as the 
Nonadmitted and Reinsurance Reform Act, or NRRA, and address 
three issues that are most problematic right now.
    The first major concern is the vastly different approaches 
States have taken to tax surplus lines transactions. The NRRA's 
taxation provisions are based on the concept of home State 
rule. Only the home State of the insured has the ability to tax 
surplus lines premiums. The Federal law permits but does not 
require States to allocate taxes amongst themselves in 
accordance with a multi-State agreement or compact.
    The States are currently taking five different approaches. 
A number of States are taxing and keeping 100 percent of the 
taxes based on their own tax rate. This is the preferred 
approach of Council members. Some States are taxing a surplus 
lines transaction based on proportion of the insured exposure 
in each State, based on each State's tax rates, but they keep 
100 percent of the tax. Other States have taken no action at 
all, which means they are only taxing that portion of the risk 
in their State. Other States have chosen to allocate, using one 
of the two methods, either NIMA or SLIMPACT. However, neither 
agreement is operational yet, leaving it to the brokers to 
figure out how to calculate, collect, and pay the taxes 
applicable in those States.
    The second major concern is that on January 1, 2012, at 
least 11 States will require brokers to use the unworkable NIMA 
allocation formula. It requires allocation of all casualty 
lines, including lines for which brokers have no information 
regarding the location of the risk. However, there is an 
alternative that was adopted by the SLIMPACT States which takes 
a more rational approach for casualty and property lines.
    The third cause of concern is the potential for double 
taxation of international risks under the surplus lines policy. 
Since the enactment of the NRRA, a number of States are 
considering taxing non-U.S. risks. And at least two 
jurisdictions have already enacted practices to do just that. 
This goes against the letter and the spirit of the NRRA and 
could subject policyholders to double taxation, which may 
violate the Due Process Clause of the U.S. Constitution. 
Moreover, the collection of taxes on non-U.S. risks has the 
potential to unfairly expose insurance producers and 
professionals to liability claims from insureds who, after 
being told by the producer to pay premium taxes to their home 
State based on 100 percent of the exposure anywhere in the 
world, are informed by a foreign jurisdiction that such 
payments are insufficient to satisfy their tax liabilities.
    In conclusion, despite congressional intent, the States 
have not devised a single uniform approach to the collection 
and allocation of premium taxes for non-admitted insurance. 
Instead, the States have gone beyond and devised multiple 
approaches that are confusing and cause compliance headaches. 
We hope the situation will improve, but once again the States 
have demonstrated they will not modernize insurance regulation 
without Federal pressure, and even then they will not do it 
easily.
    Thank you for taking my testimony and thank you for your 
continued interest in our industry.
    [The prepared statement of Mr. Monroe can be found on page 
37 of the appendix.]
    Chairwoman Biggert. Thank you, Mr. Monroe.
    Mr. Schwarcz, you are recognized for 5 minutes.

 STATEMENT OF DANIEL SCHWARCZ, ASSOCIATE PROFESSOR, UNIVERSITY 
                    OF MINNESOTA LAW SCHOOL

    Mr. Schwarcz. Thank you very much for the opportunity to 
testify to this subcommittee. I want to make four points in my 
oral testimony today that are based on my written comments.
    The first point I want to make is that one of the core 
lessons I think we learned from the global financial crisis is 
that we don't always know what we don't know. We have heard 
lots of stories today about why it is that insurance is not 
systemically risky, and I will be the first to admit that it is 
certainly true that insurance is less systemically risky than 
banking and that there are fewer concerns. That being said, we 
should all be skeptical of people who claim to have a complete 
understanding of insurance, who say things like, it is hard to 
imagine that. It was hard to imagine 2008 before it was 2008.
    So one of the lessons I think we take from the global 
financial crisis, then, is that we need an adaptive regulatory 
regime that focuses on systemic risk. We need a regime that has 
all of the information at its fingertips and that can assess 
risk across holding company structures, across legal entities 
quickly and efficiently. That is not what this legislation 
does. What this legislation does is it ensconces a particular 
view of systemic risk based on what we now think and even based 
upon the fact and even ignoring the fact that there are real 
systemic risks within insurance companies.
    We have heard that insurers do not threaten the risk of a 
run-on-the-bank scenario, but that is not true. In fact, a run-
on-the-bank scenario in life insurance is perfectly possible 
because many life insurance products allow policyholders to 
withdraw funds, to borrow against their policies. So, you 
certainly could have a run-on-the-bank scenario in life 
insurance.
    We heard that with the AIG crisis, it was only the non-
insurance entities that were problematic. Not true. There was a 
lot of instability within the insurance companies of AIG, 
particularly with respect to their securities lending program, 
and there was, in particular, a substantial amount of risk 
created by the interaction of the insurance companies and the 
non-insurance companies. The reason the insurance companies of 
AIG got into so much trouble with their securities lending 
program is because of the fact that their financial products 
unit jeopardized their liquidity. We have heard that guaranty 
funds provide a fail-safe. Not necessarily true. Guaranty funds 
at the State level are not prefunded. There is not a single 
dollar in a guaranty fund. They rely on the assumption that 
large insurers will be able to cover the risk if other insurers 
fail. That is fine and good until you have some sort of 
systemic event.
    So the assumptions upon which this legislation rests, I 
think, are problematic.
    The second point I would like to make is actually a point 
that Mr. Monroe made himself, that the States will not 
modernize until and unless there is Federal pressure. That is 
exactly true. If you look at the history of State insurance 
regulation, virtually every single thing that they do well, 
they do well because there was a threat at the Federal level to 
take over. This legislation ignores that lesson. It creates a 
domain in which State regulators are exempt from scrutiny, 
where they can give as much information as they want, where 
they don't have anyone looking over the threat of systemic risk 
that they create.
    The third point I want to make is we have heard State 
regulators have all the information that is necessary for the 
FIO and the OFR to do their job. I would submit: one, that is 
not true; and two, even if I didn't know one way or another 
that it wasn't true, you couldn't either. We don't know what 
the future will demand in terms of the necessity to gather 
information. What I can tell you, for instance, is that State 
regulators did not have information about the contracts and 
pooling relationships between AIG's insurance subsidiaries and 
its non-insurance subsidiaries. That was obviously crucial 
information at the time. If we were to think that State 
regulators had all of the information that could ever be wanted 
by a systemic risk regulator, that should not have occurred. In 
fact, recently I learned that State regulators don't even have 
copies of the products of the contracts that insurers sell to 
their policyholders, so to say that they have all of the 
information is simply not right.
    Finally, I am sympathetic to the view that regulatory 
uncertainty is problematic and we need to balance the risk and 
harms of regulatory uncertainty against the necessity of 
regulation. That is clearly true. But I would submit to you 
that this legislation targets areas that really don't create 
very much uncertainty. The subpoena power is very limited. Why 
is it then valuable? It is valuable as a threat. It is valuable 
because it will allow States and the FIO and the OFR to 
leverage that threat to collect data that they need.
    So with that I will conclude, and I will be happy to answer 
any questions.
    [The prepared statement of Professor Schwarcz can be found 
on page 53 of the appendix.]
    Chairwoman Biggert. Thank you, Mr. Schwarcz, and for all of 
you, your entire written statements will be made a part of the 
record. With that, I will turn to Member questions, and I will 
recognize myself first.
    I almost hate to ask this question, but I would like the 
three of you just to briefly tell me what are the primary 
differences between banks and insurance companies? We will 
start with you, Mr. Lanza.
    Mr. Lanza. Madam Chairwoman, I am not an expert on banks. I 
know insurance companies and how they are regulated, and I 
couldn't really explain the banking industry to you.
    With regard to the financial products, P and C companies 
sell property, casualty, and policies, and we do not sell 
products that are tied to other financial events or models.
    Chairwoman Biggert. Okay, thank you. Mr. Monroe?
    Mr. Monroe. I will keep this simple. I think there are 
several key differences between banks and insurance companies. 
In the insurance industry, I don't think there is really a risk 
of a contagion. If there is a problem in one insurance company, 
it really doesn't spread to another insurance company, there 
isn't going to be a run on the bank, and despite what Mr. 
Schwarcz said, with the hundreds of years we have had life 
insurance, there has never been a run on life insurance, and I 
don't see one happening, and it didn't happen during the 
financial crisis. Traditional P and C companies are very 
heavily regulated at the State level. The quality of their 
investments are very high, and the call on an insurance policy 
is based on an occurrence that happens. If there is an auto 
accident in California, it does not impact my ability to call 
on my auto policy in New York, so there are a lot of 
differences between insurance and banking, and there are 
liquidity issues, and the ability for the States to actually do 
an orderly runoff of insurance companies has been proven to be 
very successful.
    Take Reliance, for example, that failed in the 1990s. They 
didn't have an impact upon other companies. In fact, it is so 
competitive in the insurance industry that other companies are 
very ready, willing, and able to step in and absorb those 
customers.
    Chairwoman Biggert. Thank you. And then briefly, Mr. 
Schwarcz, since you did speak of this before?
    Mr. Schwarcz. Thank you. There are obviously a lot of 
differences. I will highlight just a few. The first is that 
there is group supervision of banks. There is not group 
supervision of insurance companies under State law right now, 
so that is a major difference. Another difference is that it is 
true that banks are certainly more susceptible to runs than 
insurers, but particularly with life insurers, it is also very 
true that the obligations can be called. Most life insurance 
products do allow for borrowing against the policy, do allow 
for surrenders of policies, and we have seen runs of individual 
insurers. Now, we have not seen a run on the life insurance 
industry generally, but I think it is hard to say whether or 
not that would or would not have happened if we didn't have the 
Federal intervention we had in the global financial crisis.
    The third point I would make is that they are not backed by 
the Federal Government in terms of guarantees. It is a State 
guaranty system. That State guaranty system is much, much less 
reliable than a Federal guaranty system.
    Chairwoman Biggert. Has that guarantee ever failed?
    Mr. Schwarcz. That guaranty system has not failed, but we 
have not had multiple concurrent insolvencies of large 
companies, so I think it is true that it has worked, and it is 
true that historically the system has worked, but I think that 
it is not true that we can be assured that it will always work 
in the future.
    Chairwoman Biggert. Okay, thank you. Mr. Lanza, under the 
draft legislation number one which is under consideration 
today, and that is to protect confidential insurance data as it 
is shared among Federal and State regulators, why do they need 
exclusive language in the law to protect confidential insurance 
data?
    Mr. Lanza. Under the Model Holding Company Act, where we 
provide State regulators a lot of detailed information about 
our business plans and other things, we are sure that the 
information is confidential. The concern here is that, if we 
are providing that same kind of information to the Federal 
Insurance Office, the way the language is written, we are not 
sure that confidentiality is retained, so this is just to 
clarify that anything we submit retains its confidentiality.
    Chairwoman Biggert. Thank you. And then Mr. Monroe, is a 
mutual insurance holding company an insurance company?
    Mr. Monroe. I am not familiar with each State's regulations 
of mutual insurance holding companies. If a mutual insurance 
holding company actually holds risk, it would be an insurance 
company, and very often they do hold risk, and then to the 
extent that they do hold risk, I think they should be subjected 
to the State regulation.
    Chairwoman Biggert. Okay. Then in your opinion, does the 
law need clarification to exclude mutual insurance holding 
companies like other insurance companies from the FDIC's 
Orderly Liquidation Authority?
    Mr. Monroe. Again, to the extent that they hold risk like a 
normal insurance company would, I think that clarification 
would be needed.
    Chairwoman Biggert. Thank you. My time has expired. The 
gentleman from Massachusetts, Mr. Capuano, is recognized for 5 
minutes.
    Mr. Capuano. Thank you, Madam Chairwoman. Mr. Monroe, I am 
just curious, has your group taken a position on an optional 
Federal charter for insurance companies?
    Mr. Monroe. I think we would like to have an optional 
Federal charter for insurance companies.
    Mr. Capuano. Honestly, as I was listening to your testimony 
and reading it this morning, it certainly seems to be heading 
that way.
    Mr. Monroe. Yes.
    Mr. Capuano. Okay. That would obviously address your 
concerns. Is that a fair statement?
    Mr. Monroe. Yes, it is.
    Mr. Capuano. That is fair enough. Thank you. Mr. Lanza, 
reading your testimony, and listening, you make several points 
on why property casualty companies are different, but I am just 
curious. You have one here that is a highly competitive market 
with low individual company market penetration, I agree that is 
a statement of fact. Is there any law that you know of, Federal 
or State, that would prohibit consolidation within the 
industry?
    Mr. Lanza. Only with regard to the process of acquiring 
insurance companies. Under State law, there is a process 
generally known as a Form A, and the States require information 
regarding market penetration and other items under something 
known as a Form E, but that is the only--
    Mr. Capuano. Right. But there is no prohibition on it, they 
just want to oversee it?
    Mr. Lanza. That is correct.
    Mr. Capuano. So the consolidation could happen like it has 
happened in a thousand other industries before; there is no 
prohibition?
    Mr. Lanza. Yes, subject to standard antitrust review.
    Mr. Capuano. They are not highly interconnected with other 
financial firms. Again, is there any law that prohibits them 
from being interconnected with other firms, like AIG was?
    Mr. Lanza. Not that I am aware of.
    Mr. Capuano. So it is an industry practice, not a 
requirement or a limitation?
    Mr. Lanza. Correct.
    Mr. Capuano. The last one is the low financial leverage. 
Again, all these statements I agree with as of today, I think 
they are all factually accurate, I am not arguing at all, but 
again, is there any law that prohibits or limits the amount of 
leverage an insurance company might have?
    Mr. Lanza. Yes, there is, related to--not only from a 
regulated side but from a ratings standpoint in terms of the 
amount of debt and other things you have, you are governed by 
the rating agencies in addition to the regulators who are 
concerned about various--
    Mr. Capuano. I wouldn't associate myself too much with the 
rating agencies after what they did the last couple of years. 
They have gotten better, but my faith is not restored just yet.
    I would like to see anything it limits, because I am not 
aware of any Federal law that limits the leverage. Again, I 
agree that it is an industry practice at the moment, that you 
are not a highly levered industry, but I don't know of anything 
that prohibits you from being that. If there is one, I would 
like to see it and I would appreciate your forwarding it to us 
as you go along.
    But I have to say, and I also agree with the statement that 
you made that says, ``there is little likelihood that one 
failed PCA insurer requires other financial institutions to 
fail.'' I agree with that. I think that is a fair statement. My 
concern is that everything else after this, including that, is 
all what it is now, not what it could be tomorrow.
    And, you made some good points on confidentiality. I 
totally agree with you if there are holes. I would like to work 
with you in filling those holes. There is no sense there.
    But everything else is--you are concerned with yes, they 
may not coordinate with States. And if they don't, I agree with 
you that we should work on that. That was the whole idea, that 
they would coordinate with States. But, again, something that 
may happen, my concern is that what may happen is that we end 
up with one big huge P/C company that is overleveraged and 
unregulated.
    I don't expect that is going to happen tomorrow, but it is 
my concern that it may happen. And the whole concept of what we 
did in the insurance industry was simply to gather information 
so that we could hopefully be ahead of the curve the next time 
in case this situation starts setting itself up. And, again, I 
am not arguing one iota that under today's situation, property 
casualty companies are anything other than safe and secure. 
From everything I know, I agree with you.
    I am not concerned about today; I am concerned about 
tomorrow and the idea being that if we don't have information 
gathered with someone, some neutral people looking and asking 
questions confidentially, I totally agree with that, that we 
put ourselves at risk. Again, not for the good players, it is 
never the good players I am worried about. Regulations are not 
there for people who want to live by the rules and the 
standards of the industry.
    Regulations are always there for the outliers, for the 
people who drag an entire industry down or drag an entire 
economy down. So I will argue very clearly that, again, the 
details of confidentiality--I am happy to work with you--but 
exempting, pretending that because we have a situation today, 
it will never change, I think is really shortsighted, and I 
think it really opens the door to true problems tomorrow.
    And I say that only because I have absolute total faith 
that the insurance industry is a lot smarter than government. 
You will come up with ways around anything we do, as you 
should. That is the nature of private industry.
    My concern is not that, and I am not trying to take anybody 
down, not call anybody a bad player. I agree with you on the 
comments you make about current and past history on property 
casualty. But to pretend that a major industry or player, a 
major financial player, will never, ever put us in a difficult 
situation I think ignores the facts of 2008 and pretends that 
nothing will ever change. And, again, for the details of what 
is going on, especially since even you agreeing to testimony 
that FSOC basically said you are not a risky player.
    That is pretty much what they said. That is what you said 
in your testimony, and I agree with that. That is pretty much 
what they said. But to then say that because I have already 
done it, that they will never be allowed to do it, simply says 
we want to go back on the same footing as we had before. And I 
apologize, I guess my time is over. I didn't think I would take 
the whole 5 minutes, but I apologize. So I will represent 
details as far as making sure that the rules that we have are 
right, but I think it is a mistake to pretend that what is will 
always be.
    Chairwoman Biggert. The gentleman's time has expired.
    Mr. Capuano. I apologize.
    Chairwoman Biggert. That is fine.
    The gentleman from Virginia, Mr. Hurt, is recognized for 5 
minutes.
    Mr. Hurt. I thank each of you for your testimony. And, Mr. 
Schwarcz, I was interested in your testimony and I appreciate 
the fact that you seem to recognize that there should be a 
cost-benefit analysis that goes with every regulatory 
structure. And you spoke of balance, and I appreciate that.
    But I guess I have two questions. One deals with the State 
regulatory structure and what I think everybody agrees, it 
seems like even you agree that we have evidence of successful 
regulation by the States of these companies. And I guess my 
question for you is, if you have that evidence, you can say we 
don't know what we don't know, but I am not sure how that 
guides us as policymakers in trying to game out every 
possibility despite the overwhelming evidence to the contrary.
    I think that when the legislature does that, when we try to 
base policy on what we think could possibly happen in the 
future, I think that you will always wind up with unintended 
consequences. The answer to every problem here in Washington 
seems to be, we will just regulate it, and I think that at 
least as I travel across the Fifth District of Virginia where I 
represent people who recognize that is not a good formula for 
encouraging job growth and prosperity and freedom, and maybe 
you could speak to that.
    Mr. Schwarcz. Absolutely, thank you for the question. Let 
me just first address your point of how do we, as policymakers, 
respond to the fact that we don't know what we don't know. To 
me, this is really a fundamental point, and I think it goes to 
what systemic risk regulators need to do, because we all have 
to admit that this is complex stuff that none of us fully 
understand, and we are learning about it as we go.
    The answer is, you build regulatory systems that are 
adaptive, that are flexible, that can learn and that limit 
uncertainty, but at the same time, you don't hamstring them by 
precommitting them to visions about what is and is not 
systemically risky.
    So my concern with this legislation is it is based--and it 
encapsulates this view about what systemic risk is and is not 
that we can't be sure is right.
    And so I admit we need to make that balancing, but to me 
the costs of uncertainty that are being addressed here are just 
so limited. Subpoena power? Why is that valuable? It is 
valuable because it allows for the threat to get information 
quickly, and it allows for the FIO to be able to criticize the 
States without worrying that States are going to say, then, I 
am not going to give you information.
    Mr. Hurt. Thank you, because that was my next question, and 
that deals with the data collection. It seems to me that a 
prudent policy to come from Congress would be that we will rely 
on the State regulators who demonstrated that they can regulate 
successfully and that they have the data necessary for the FIO 
to be able to make the judgments that it needs to make, so then 
why don't we allow that system to work. Let's try that, and 
then if it doesn't work, if the FIO comes back to this 
committee and comes back to Congress and says, hey, we are not 
getting your information we need from the States, then let's 
fix it. It seems to me that is a more prudent approach 
consistent with what you just said.
    Mr. Schwarcz. It is very hard--as I am sure you know much 
better than me--to change the law, right, it is very hard to 
say, have the FIO come and change the law and it is very hard 
to get, so I think what you need is you need a system that can 
adapt more quickly than that.
    And the other point I would make is we keep saying, State 
regulations work reasonably well. I would say that State 
regulations did not work particularly well in the case of AIG. 
I think that there was a real failure to appreciate among State 
regulators the fact that non-insurance companies within holding 
companies can have real risks for the insurance companies. 
There was a lack of an appreciation at the interconnectedness 
among the different entities and there was the lack of 
information about the nature of that interconnectiveness.
    We keep saying AIG didn't fail and insurance companies are 
safe. What was bailed out? We don't know what would have 
happened to the insurance companies if there hadn't been a 
bailout.
    So my claim is not that State regulation isn't working at 
all; it is that we need to be cognizant to the fact that there 
are limitations, that there is not a proven track record on 
group regulation and respond accordingly.
    Mr. Hurt. Thank you, Mr. Schwarcz. Thank you, Madam 
Chairwoman, I yield back my time.
    Chairwoman Biggert. The gentleman from Ohio, Mr. Stivers, 
is recognized for 5 minutes.
    Mr. Stivers. Thank you, Madam Chairwoman. I appreciate the 
hearing on this matter.
    And the first question I have is for Mr. Lanza. Do you 
believe we have an effective State-based regulation system in 
America?
    Mr. Lanza. Yes.
    Mr. Stivers. Great answer, quick answer.
    The second question I have is for Mr. Schwarcz. I am just 
curious what you think is wrong with the Federal Office of 
Insurance being required to work with existing regulators, and 
I want to quote from the actual discussion draft and help you 
explain to me what you have a problem with on page 3 where it 
says, ``before data collection from a nonbank financial company 
that is an insurer or their affiliate of an insurer pursuant to 
title II, a financial regulator shall coordinate with each 
relevant Federal agency, State insurance regulator or other 
relevant State and Federal regulator, agency, in the case of an 
affiliate or insurer, and any publicly available sources that 
determine if the information can be collected is available and 
may be obtained in a timely manner by that State or Federal 
agency or through publicly available sources.''
    What is the problem with that?
    Mr. Schwarcz. I don't have any particular problem with that 
language. That language actually is already basically in Dodd-
Frank. That is one thing that I don't really understand. You 
are changing Dodd-Frank to do what Dodd-Frank already does.
    But the problem I have with respect to that draft bill is 
the lack of subpoena power, because then, if that information 
is not available, you have no capacity to go out and get it. 
And, moreover, it is not that I think subpoenas are going to be 
issued all the time so, as I said, the threat of a subpoena 
changes the dynamic. It allows you to get information, and it 
allows the FIO to do so without having to be completely 
beholden to State regulators.
    Mr. Stivers. Right. Mr. Schwarcz, you are a law professor, 
correct?
    Mr. Schwarcz. That is correct.
    Mr. Stivers. So isn't there essentially a regulatory 
unwritten rule that those that get subpoena power are also 
those that regulate? Isn't that historically the way we have 
regulated?
    Mr. Schwarcz. I would think that unwritten rules are not a 
good way to operate.
    Mr. Stivers. But isn't that a good system? Shouldn't people 
only have subpoena power when they can regulate?
    Mr. Schwarcz. No. The entire point of the FIO is to--the 
mission of the FIO is to monitor the insurance market, and to 
potentially recommend changes. So you are going to task an 
agency to monitor a market and to potentially suggest changes 
to a State-based system, but then to have it beholden to the 
State-based system in getting information?
    That means that the only information they have is the 
information that regulators have, and it might be that the 
reason you need to modernize regulation is because regulators 
aren't capturing all the relevant information.
    Mr. Stivers. Did you take a look at the discussion draft on 
page 4 where it basically covers how the regulators can request 
information if they feel that information is either not 
publicly available or not, will not be available in a timely 
way, Mr. Schwarcz?
    Mr. Schwarcz. Yes, and I continue to believe that is not 
sufficient because, again, one of the potential roles of the 
FIO is to suggest how State regulations are insufficient, the 
problems that exist there. Now, if I am going to be the person 
who is going to sit there and be critical of, and you say here 
are the ways in which you need to change, the best way of 
making sure that I don't do that very effectively is to say in 
this--and you can ask the person who you are criticizing for 
information--and there is an unwritten rule that they might 
have to give it to you but no actual rule and no subpoena 
authority.
    And then what you are going to say is, sure, I will give 
you this information, but only so long as you make me look 
good. And if you don't make me look good, I am not sure if I am 
going to give it to you or not, so you need that threat.
    Mr. Stivers. Are you familiar with the costs related to 
data collection in some cases that have been particularly 
burdensome, and would you favor some type of system to ensure 
that there is a cost-benefit analysis on the cost of the data 
collected versus the actual benefit of the data, because I 
think that is the concern that led to this draft. So can you 
maybe help us with your thoughts on that?
    Mr. Schwarcz. Yes. Absolutely, I think the FIO needs to 
think about the costs of any data call versus the benefits. And 
so does the Office of Financial Research and, again, I am 
certainly not completely unsympathetic to the view that 
regulation is costly and getting data is costly; we just need 
to balance it. So I agree with that principle, but to me, that 
is not what is encapsulated here because the legislation sort 
of is predetermined about how that cost benefit analysis--
    Mr. Stivers. Sure. I do want to quickly, because I have 
about 30 seconds left, it seems to me that it is hard to 
construct a circumstance where there would be some mass run on 
people borrowing on their life insurance accounts. Can you help 
us, as a committee, understand your thought process there and 
what you were trying to build, because it really seems like the 
banking system would have to have collapsed or something out of 
that, and it just seems difficult to imagine.
    Mr. Schwarcz. Sure. No, people wouldn't be doing that 
because they didn't have money from banks. What would happen is 
that there would be a massive loss of confidence in a 
particular life insurer say, several life insurers. All of a 
sudden, big news stories broke about how they weren't, they 
didn't have money to pay claims. People would then worry, I am 
not going to get anything, I better start going and taking out 
my cash to the extent I can from this life insurer, and then 
that would be exacerbated by the fact--again, this is a 
potential calamitous scenario, but we need to think about it--
that State guarantee funds wouldn't potentially cover all of 
the exposure out there. So that is how it could occur.
    Mr. Stivers. My time has expired, Madam Chairwoman. Thank 
you.
    Chairwoman Biggert. Thank you, Mr. Stivers. The gentlelady 
from Wisconsin, Ms. Moore, is recognized for 5 minutes, and 
thank you for joining our subcommittee today.
    Ms. Moore. Thank you so much, Chairwoman Biggert, for 
allowing me to come discuss your discussion drafts. I am 
specifically interested in discussion draft number 2, which is 
to exclude insurance companies from the FDIC's Orderly 
Liquidation Authority and, Madam Chairwoman, I guess I would 
like to yield to you before I address our distinguished panel, 
because I am just seeking clarification.
    In the original Dodd-Frank bill, there was an amendment 
offered by me and Ms. Speier which, in fact, excluded--let me 
see, I have the amendment here, it amended section 203, and we 
inserted part E, which an insurance company that is covered, if 
it is a covered financial company or a subsidiary or affiliate 
of a covered financial company, the liquidation or 
rehabilitation of such insurance company and any subsidiary or 
affiliate of such insurance company that is not accepted under 
paragraph 2 shall be conducted as provided under applicable 
State law.
    Our intent with this amendment was to distinguish that 
insurance companies and, indeed, mutual insurance companies, 
were not subject to FDIC resolution because they didn't provide 
systemic risk.
    So I want to yield to you, Madam Chairwoman, because my 
question is, do you think that perhaps discussion draft bill 2 
may be duplicative? I understand and I agree with what you are 
trying to do, but I believe we have already done this through 
Dodd-Frank.
    Chairwoman Biggert. Actually, this part of the legislation 
is based on your amendment to the Dodd-Frank bill. So I think 
it was to make explicit clarification of that amendment.
    Ms. Moore. Okay, because the thing that I think that--the 
extent to which there was any exposure--maybe I can ask you 
gentlemen now--to the extent that there was any discussion of 
bringing the insurance industry into it was because AIG was 
systemically risky in terms of it being a threat and being an 
insurance company and having all of these various activities. I 
guess I want you all to respond of what your understanding of 
discussion draft 2 is.
    This would not--we are not talking about limiting the 
FDIC's ability to resolve or interfere with a systemically 
risky firm that has--insurance company that has a financial 
institution connected with it. Is that your understanding of 
this draft as well?
    Mr. Lanza. Yes. The concern we have is the fact that an 
insurance company, which is governed by statutory accounting 
rules, which is the liquidation value, would have assets go to 
areas other than the policyholders. So the concern is that we 
would like the insurance regulator to approve any assets going 
for anyone other than the policyholder.
    Ms. Moore. So you think that this discussion draft is 
necessary because you are concerned that assets may go to 
someone other than the policyholder. Are these investors? What 
are the other entities that you anticipate?
    Mr. Lanza. The purpose of the State regulatory system is to 
have the assets of the insurance company available to pay just 
the policyholders. And if you can put a lien on those assets to 
resolve another organization other than the insurance company, 
that is problematic if there were policyholders at risk. So we 
believe that the discussion draft solves the problem of having 
any assets go anywhere beyond the policyholder.
    Ms. Moore. Would anyone else like to respond to that?
    Mr. Schwarcz?
    Mr. Schwarcz. Actually, my understanding was the draft bill 
didn't change very much in Dodd-Frank.
    Ms. Moore. It did?
    Mr. Schwarcz. It did not change very much. Dodd-Frank 
already reflected the fact that insurers would be resolved by 
State entities, and it allowed the FDIC to intervene if the 
State regulators were not, in fact, operating. And I am not--I 
would need to study this a little bit further to understand 
whether that authority is removed or not. I would think that 
authority is important, again, to create the leverage the State 
regulators are not acting, but I do think it is a matter of 
sort of--it makes sense at first to have State regulators 
resolving insurance companies.
    Ms. Moore. Thank you so much. And thank you, again, Mrs. 
Biggert for allowing me to attend this meeting.
    Chairwoman Biggert. Thank you.
    Ms. Moore. I just wanted to seek that clarification. Thank 
you. I yield back.
    Chairwoman Biggert. The gentleman from Wisconsin, Mr. 
Duffy, is recognized for 5 minutes.
    Mr. Duffy. Thank you, Madam Chairwoman. It appears there is 
somewhat of a disagreement on the panel as to how we should 
move forward. And I don't know, Mr. Lanza or Mr. Monroe, if you 
had a chance to read over Mr. Schwarcz's statement before you 
came here, but you have had a chance to hear it. Now that you 
have heard his position or his take on the drafts, do you agree 
with them?
    Mr. Lanza. No. In particular, on the subpoena power, my 
company has seven subsidiaries in addition to all of the 
quarterly and annual statements we have to file, we average 
about 840 data calls a year. Now those data calls, some of them 
are very easy for us to respond to because it is financial 
information that we track in evaluating the profitability and 
other performance factors of our business, but some of those 
data calls are information we may not have. And the cost of 
finding that information in some cases can get complicated 
because we don't have the systems in place in order to capture 
it.
    So the issue we have around the whole thing is that if the 
FIO was to study the industry as a whole, it makes sense for 
them to go to the State regulators to study the industry as a 
whole before they come to the individual companies.
    Mr. Duffy. Mr. Monroe?
    Mr. Monroe. I didn't get a chance to read Mr. Schwarcz's 
testimony before I got here, and the counsel always supports 
efforts to improve insurance regulations. We supported the NRRA 
because of the disparate treatment of surplus lines taxes 
across the United States. So to the extent that there are gaps 
in State regulation that the Federal regulation can help 
improve, we would certainly be willing to look at that and 
support it to the extent that it will improve the insurance 
industry.
    Mr. Duffy. Okay. And Mr. Schwarcz, quickly, how many of our 
property and casualty insurers currently pose a systemic risk? 
If you know?
    Mr. Schwarcz. I am not sure. I think that we can't be 
perfectly sure. My understanding is that based on the recently 
proposed regulations by FSOC, essentially zero. I think it is 
pretty clear zero property casualty insurers are going to fall 
under that. I think my point would be that we need to plan for 
the future and sort of allow for that flexibility.
    Mr. Duffy. What kind of risk do they pose today?
    Mr. Schwarcz. What type of risk do property--today?
    Mr. Duffy. Yes.
    Mr. Schwarcz. I think that today, as far as we know, they 
pose little systemic risk.
    Mr. Duffy. And if we look at the potential of a systemic 
risk that you are trying to be a visionary here and look into 
the future, if we give a little more authority for oversight on 
the Federal side, will that very much lessen the systemic risk 
for the future?
    Mr. Schwarcz. So, two things. First, I am not trying to be 
a visionary; what I am trying to do is actually say that you 
are not visionaries either. We don't know.
    And that is why we need to adjust the system, take into 
account that none of us are visionaries, none of us predicted 
2008, and that is why we need a flexible regime that is not 
hamstrung by preordained conclusions.
    Mr. Duffy. But I would say that with property and casualty 
insurance you are saying, listen, there is a potential for 
systemic risk in the future and, therefore, you want to head 
that off at the pass today. So in a way, I would say you are 
acting as a visionary.
    Mr. Schwarcz. I will leave it to others to decide whether 
or not I am either a visionary or attempting to be one. But 
what I would say is that I don't perceive much systemic risk in 
the property casualty realm right now right now. I perceive it 
more in the life realm, but I think that we don't want 
regulatory assistance that ensconces that viewpoint and doesn't 
consider the possibility that it might be wrong.
    Mr. Duffy. Thank you. And I wanted to take the remainder of 
my time and yield it to Mr. Stivers.
    Mr. Stivers. Thank you to the gentleman from Wisconsin. I 
have a quick question for Mr. Monroe and Mr. Lanza.
    In the scenario that Mr. Schwarcz gave earlier about a run 
on life insurance companies, wouldn't the State regulatory 
scheme under McCarran-Ferguson have to essentially completely 
collapse and fail and the State regulators not do their jobs?
    Mr. Lanza. I believe so.
    Mr. Monroe. I would have to agree with that. I can't 
imagine a scenario where it would be a contagion from life 
insurance company to life insurance company. In fact, given the 
competitiveness of the insurance market, I think if there was a 
run on one, others would quickly step in.
    Mr. Stivers. And the last question, I guess, for Mr. 
Schwarcz, given our discussion earlier about subpoena power, is 
there any requirement now for the FIO to do any cost-benefit 
analysis before they would issue a subpoena?
    Mr. Schwarcz. I don't have Dodd-Frank before me right now, 
but I think the answer is no.
    Mr. Stivers. I yield back--or to the gentleman from 
Wisconsin.
    Mr. Duffy. No, I yield back.
    Chairwoman Biggert. I thank the gentleman. The gentleman 
from California, Mr. Sherman, is recognized for 5 minutes.
    Mr. Sherman. Thank you. Mr. Lanza, you said the 
confidentiality provisions of Dodd-Frank are insufficient to 
protect insured data. Perhaps you could enlighten us on that a 
bit.
    Mr. Lanza. Our concern is over the transfer of that 
information from the FIO to the other agencies, and we just 
want to make sure that it is clear that any information we 
submit, wherever it goes, is confidential so that we don't lose 
that. Some of the information we submit is highly proprietary, 
and that is the concern.
    Mr. Sherman. Could the relevant agency simply adopt 
confidentiality policies? Would they need to be formal 
regulations? Do we need a statute? What do we need to do to 
protect the confidentiality?
    Mr. Lanza. Our suggestion is that you do it through the 
discussion draft. And that is what we support. We think it is 
the cleanest way to ensure it because of the nature of the data 
and its competitiveness.
    Mr. Sherman. Mr. Schwarcz, one of the concerns of my 
constituents is that they are going to outlive their savings. 
The life insurance and annuity industry has created a product 
called longevity insurance. They might have called it life 
insurance, but that name had already been taken. And this is an 
annuity that starts paying you when you reach age 70, 80, 90, 
whatever it is, but none of them have been able to find it 
inflation adjusted.
    I have talked to the insurance folks, and they have said, 
we don't want to take the risk of inflation, and I wondered why 
we have insurance companies if risk taking is not pretty much 
the job they are supposed to do.
    What policy changes do we make so that in addition to 
Social Security, which is an inflation-adjusted longevity 
insurance that starts at age 65, what do we do to cause the 
annuity and life insurance industry to offer what people want, 
indeed, they may not focus on it with the technical terms, but 
an inflation-adjusted annuity that begins at an advanced stage?
    Mr. Schwarcz. Thank you. This is something I can't offer 
definitive thoughts on right now. I would need to think about 
it.
    Frankly, I am a little cautious about the idea of trying to 
say, people want this, therefore, we should try to sort of 
adopt some policy to encourage carriers to provide it. I think 
if people wanted it enough, carriers will provide it. They just 
probably don't want it enough and that people won't pay for it.
    Mr. Sherman. They speak somewhat vaguely about it.
    Mr. Schwarcz. Right. There are--
    Mr. Sherman. I had a career in the financial world and one 
in politics and kind of focused on trying to take what people 
are saying about finance and translate it in a language that 
you would speak.
    Mr. Schwarcz. Right.
    Mr. Sherman. They are afraid of outliving their savings.
    Mr. Schwarcz. Sure.
    Mr. Sherman. They might buy a longevity policy. They would 
be making a mistake in that they would be fully insured except 
for inflation.
    Mr. Schwarcz. Right.
    Mr. Sherman. So maybe you could add to the record anything 
that you think could help people know that they need an 
inflation-adjusted longevity policy and/or let the companies 
know that they ought to be offering it.
    Let me return to Mr. Lanza.
    I am intrigued with your suggestion that Dodd-Frank asks 
insurers to help pay the resolution costs for other failing 
financial companies, but the other companies don't help to pay 
for insurance resolution costs, chiefly because there are State 
funds that do that. This doesn't exactly seem fair.
    Can you tell us more about the State resolution system and 
why Dodd-Frank seems to recreate this inequity?
    Mr. Lanza. The State resolution systems, through the 
guarantee funds, have the ability to only assess the industry, 
and that is the specific insurance industry, so it is property 
and casualty related, property and casualty failures. And so if 
you have the FDIC involved in any related company, the concern 
is that we would wind up paying guaranteed fund assessments and 
also be assessed for whatever additional amounts the FDIC wants 
to assess.
    Mr. Sherman. I thank you for your answer, and some will 
remember I fought in this room successfully to leave companies 
under, I believe it is $75 billion, out of the main assessment 
program in Dodd-Frank. And I think my time has expired.
    Chairwoman Biggert. I thank the gentleman for his 
questions.
    I would now ask unanimous consent to insert the following 
material into the record: a November 15, 2011, letter from the 
National Association of Professional Surplus Lines Offices, 
Ltd.; November 15, 2011, testimony from the National 
Organization of Life and Health Insurance Guaranty 
Associations; November 15, 2011, testimony from the National 
Conference of Insurance Guaranty Funds; November 15, 2011, 
testimony from the Independent Insurance Agents & Brokers of 
America; a November 14, 2011, letter from the National 
Association of Mutual Insurance Companies; a November 14, 2011, 
letter from the Risk and Insurance Management Society; a 
November 13, 2011, letter from the Nationwide Mutual Insurance 
Company; and a November 9, 2011, letter from the National 
Conference of Insurance Legislators.
    Without objection, it is so ordered.
    The Chair notes 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 like to thank the panel so much for being here 
and for your testimony. I really appreciate all the important 
information that you have given us today. Again, thank you so 
much.
    With that, this hearing is adjourned.
    [Whereupon, at 11:30 a.m., the hearing was adjourned.]


                            A P P E N D I X



                           November 16, 2011


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