• Possible Impact of "The Wall Street Reform and Consumer Protection Act of 2009"
  • January 14, 2010
  • Law Firm: Fowler White Boggs P.A. - Tampa Office
  • Lawmakers are looking for a way to better understand and regulate the insurance industry. H.R. 4173, also known as The Wall Street Reform and Consumer Protection Act of 2009, first introduced by Rep. Barney Frank (D - MA) on December 2, 2009, passed the House after a vote of 223 -- 202 on December 11, 2009. Title VI of H.R. 4173 is cited as Federal Insurance Office Act of 2009. This particular act would establish the Federal Insurance Office (FIO) as part of the Department of the Treasury. See H.R. 4173, Title VI, § 313(a). The FIO would operate under the authority of a Director appointed by the Secretary of the Treasury, see H.R. 4173, Title VI, § 313(b), in order to create and “to enhance Federal understanding of insurance issues.” H.R. 4173, Title Summary. The authority of the FIO would extend “to all lines of insurance except health insurance, as determined by the Secretary [of the Treasury] based on section 2791 of the Public Health Service Act (42 U.S.C. §§ 300gg-91).” H.R. 4173, Title VI, § 313(d).

    Arguments from both sides

    Proponents of the bill argue that the collapse of insurance giant American International Group (AIG) and the turmoil surrounding the bond insurance markets lends further support that insurance regulation is insufficient in its present state. Additionally, the creation of the FIO could provide federal policymakers with the information and resources to better respond to crises, mitigate systemic risks and help ensure a well-functioning financial system. The FIO would also be able to provide a more global platform allowing insurers to reach beyond statewide borders and compete on a worldwide level.

    Opponents argue that the FIO could lead to dual regulation of the insurance industry at both the state and federal levels. Also, vast quantities of previously undisclosed information would have to be made available by the insurance companies, whose business it is to gauge risks, in order to comply with the FIO’s broad authority to monitor all aspects of the insurance industry. They maintain that while in principle the FIO would be a source of information and expertise within the Treasury Department, because ultimately the FIO's leadership will be staffed by political appointees, the FIO - like other federal agencies - provides a means wherein an activist agenda could take hold and could prove costly and confusing to insurers and consumers alike.

    With the recent turmoil of the financial markets in the United States, most lawmakers wish to provide some regulatory reform in this vital industry. What constitutes the best approach, however, is debatable and such contentions may halt the proposed bill’s progress through Congress. After having passed in the House, it remains to be seen how the Senate will modify the proposed section of the bill, if at all.