[Congressional Record Volume 153, Number 86 (Thursday, May 24, 2007)]
[Senate]
[Page S6849]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SUNUNU (for himself and Mr. Johnson):
  S. 40. A bill to authorize the issuance of Federal charters and 
licenses for carrying on the sale, solicitation, negotiation, and 
underwriting of insurance or any other insurance operations, to provide 
a comprehensive system for the Federal regulation and supervision of 
national insurers and national agencies, to provide for policyholder 
protections in the event of an insolvency or the impairment of a 
national insurer, and for other purposes; to the Committee on Banking, 
Housing, and Urban Affairs.
  Mr. SUNUNU. Mr. President, I rise today to reintroduce legislation 
that will bring our Nation's insurance regulatory system into the 21st 
century by providing uniformity, predictability, and greater efficiency 
to the way insurance is regulated in this country.
  The National Insurance Act of 2007, which builds upon legislation 
Senator Johnson and I first introduced last year, provides for an 
optional Federal charter that would offer insurers the choice of being 
regulated under a new Commissioner of National Insurance or under the 
continued jurisdiction of the States.
  I am pleased that Senator Johnson once again joins me as an original 
cosponsor of this bill. Since we introduced the initial National 
Insurance Act just over a year ago, momentum has been building for the 
reforms called for under our legislation and the question has become 
not whether an optional Federal charter should be implemented, but 
when.
  In an increasingly global financial services industry, numerous 
studies have called for changes to the manner in which insurance is 
regulated in the United States as one of the ways to make our financial 
services sector more competitive in the worldwide economy.
  The bipartisan Bloomberg-Schumer report on financial services 
industry competitiveness, for example, states, ``One priority, in the 
context of enhancing competitiveness for the entire financial services 
sector and improving responsiveness and customer service, should be an 
optional federal charter for insurance, based on market principles for 
serving customers.''
  Furthermore, the Blue Ribbon Commission on Mega-Catastrophes states, 
``It (an optional federal charter for insurance) would lead to . . . 
consistent regulation of insurer safety and soundness, and the 
elimination of duplicative regulation and supervision . . .In addition, 
an OFC should promote greater competition that would benefit 
policyholders.''
  In addition to the study recommendations, a number of other 
indicators suggest that the time is right for reform. The coalition in 
support of the bill continues to grow and the general acceptance of the 
concept of reform we have proposed is also growing.
  The arguments against the bill are increasingly seen for what they 
are: parochial in nature, rather than forward-looking and in the best 
interests of consumers, our financial services sector, and the strength 
of our overall economy.
  In 1999, Congress passed the Gramm-Leach-Bliley Act--broad 
legislation that modernized the rules that regulate banks and 
securities firms and provided a foundation for the financial services 
industry to become more integrated, market-oriented, technologically 
advanced, and global in nature. Since then, consumers have 
benefited from improved industry competition and innovation, greater 
choice of financial products, and more efficient delivery of services.

  The insurance industry, however, has not enjoyed the same dynamic 
marketplace within the global economy. Long subject to a patchwork of 
State regulations, the sector's menu of available services is not as 
robust as it could be. An inefficient regulatory system spread across 
more than 50 different jurisdictions imposes direct and indirect costs 
on insurers in the form of higher compliance fees associated with non-
uniform regulations and delayed market entry for new products from 
onerous approval barriers.
  With advances in technology, insurance is increasingly a global 
product that cries out for a more consistent and efficient regulatory 
environment that allows new products to be brought to market in a much 
quicker fashion than the current system often allows. Under the State 
regulatory regime new product launches are consistently delayed up to 2 
years while they await the approval of an individual State regulator.
  A more uniform regulatory environment, mirroring the highly 
successful dual banking system, should substantially improve the 
climate in several critical ways for those who buy, sell and underwrite 
insurance, while also providing superior consumer protection.
  As the Bloomberg-Schumer report puts it, our bill would allow best-
in-breed regulations to ``rise to the top'' and become national 
standards. A division of consumer protection, as created by the 
regulator, would oversee strict regulations and guard against unfair 
and deceptive practices by insurers and agents for the advertising, 
sale and administration of products. A division of insurance fraud, 
also created under the bill, would make insurance fraud a Federal 
crime.
  While taking these cautionary steps to protect consumers, the bill 
does not, however, permit the Federal regulator to set rates or price 
controls for insurance. Instead, the National Insurance Act 
appropriately relies on competitive pricing within the marketplace.
  Finally, the Office of National Insurance would be able to fill a 
vacuum and provide true national regulatory expertise and guidance on a 
number of issues Congress is legislating on that affect policyholders, 
the health of the insurance industry, and the overall economy.
  The only real substantive change to this year's bill in comparison 
with the one introduced last year is that our updated legislation 
includes language that would add surplus lines of insurance as a type 
of insurance that a person with a Federal producer's license would be 
authorized to sell under the Federal charter program.
  Other technical and clarifying changes were made, but by and large 
this is last year's bill, with its spirit and purpose intact.
  Former New York Insurance Commissioner, George Miller, who founded 
the National Association of Insurance Commissioners, NAIC made the 
following statement in 1871: ``The Commissioners are now fully prepared 
to go before their various legislative committees with recommendations 
for a system of insurance law which shall be the same in all States, 
not reciprocal but identical, not retaliatory, but uniform.
  It's now been over 135 years since that statement was made, and 
unfortunately we are not much closer to Mr. Miller's goal.
  In the months ahead, however, we look forward to making substantial 
progress on this legislation as we build on the momentum to modernize 
this country's insurance regulatory system and do what the State system 
has failed to do for over 135 years.
                                 ______