2015 legislative and regulatory agenda is a mixed bag

No issue dominates this year’s legislative and regulatory agenda of the risk management and property/casualty insurance community as reauthorization of the federal terrorism insurance backstop did even several weeks ago.

Extension of the program, which lapsed several days before Congress reinstated it in early January, united the industry around a single goal.

But with the program in place until the end of 2020, familiar themes such as clarifying and tempering provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Patient Protection and Affordable Care Act appear among the policy goals of some groups.

New issues, such as federal tax reform and expanding risk retention groups’ offerings to include property coverage, also have some support.

How Dodd-Frank will affect insurers remains a key industry question.

As Leigh Ann Pusey, president and CEO of the Washington-based American Insurance Association, noted during a briefing earlier this month, the law is part of a regulatory regime that includes domestic and global components. She said insurers are trying to avoid having to deal with additional levels of regulation.

The Property Casualty Insurers Association of America is considering a “basket of issues surrounding” the Financial Stability Oversight Council and the Federal Insurance Office, both of which were established by Dodd-Frank, said Nat Wienecke, a senior vice president at the PCI’s Washington office.

The FSOC determines which companies are systemically important and subject to heightened oversight, he said. “But it doesn’t give them a clear path” to determine what steps to take to be removed from the list of systemically important financial institutions. “It’s like the Hotel California; once you get in, you can never leave,” he said in paraphrasing the Eagles’ song.

Concern about regulation extends overseas, said Jimi Grande, senior vice president in the Washington office of the National Association of Mutual Insurance Cos. “We would like to see a serious focus on oversight of the federal agencies that are negotiating new global standards for insurers,” he said. “We need to end the discussion about importing bank-centric regulations from the E.U. for U.S. insurers.”

For the Reinsurance Association of America, movement on covered agreements is key, RAA President Frank Nutter said. “We’ve been supportive of a covered agreement that provides both U.S. domestic companies as well as foreign reinsurers with a clearer cross-border trading route,” he said.

Covered agreements are essentially treaties for the nation’s treatment of cross-border reinsurance.

Mr. Nutter said RAA also is following tax reform discussions. Tax reform “whatever that might end up meaning,” also is on the AIA’s radar, Ms. Pusey said.

“There have already been discussions about where that will go,” said Charles Symington, senior vice president of the Alexandria, Virginia-based Independent Insurance Agents and Brokers of America. “As small business owners, a lot of our members are organized as pass-through entities. We have to stay very vigilant that those entities that file (income taxes) at individual rates are not unduly disadvantaged.”

Allowing risk retention groups to offer members commercial property coverage as well as liability cover is favored by the Council of Insurance Agents & Brokers, said Joel Wood, the group’s Washington-based senior vice president. “We don’t think we should have to wait for a crisis to have a modest, sensible expansion of the act.”

Mr. Symington said the IIABA is “currently neutral” on expanding the RRG law.

“It has to be done correctly,” he said. “You have to have adequate capital requirement and must have state oversight. State insurance commissioners must be comfortable with these entities and any possible expansion. It has to be proven that it’s necessary, and that there is a marketplace need.”

The council’s Mr. Wood said 2015 “will be largely a year about benefits. While there will be the early votes on the 40-hour workweek and the employer mandate, we expect as the calendar ticks by there will be greater likelihood of some agreements on the ACA.”

He said that of the 174 million U.S. residents who receive their health insurance through their employer, about two-thirds are receiving products brokered by council members.

Also of particular interest to the council is clarifying the scope of the Foreign Account Tax Compliance Act. While it is designed to target noncompliance with U.S. taxes by U.S. taxpayers with foreign accounts, the council and other groups fear it could be extended to some property/casualty transactions. “We made some headway last year on the regulatory process on FATCA, but we still would like to see noncash value property/casualty insurance transactions exempted from the FATCA. It could be achieved either through legislation or through regulatory processes,” Mr. Wood said.

The Risk & Insurance Management Society Inc. supports legislation that clarifies that captive insurance is covered by the Nonadmitted and Reinsurance Reform Act and legislation that “encourages uniformity and reciprocity among states that license insurance claim adjusters,” said Janice Ochenkowski, chair of RIMS external affairs committee and international director of global of risk management for Jones Lang LaSalle Inc. in Chicago.