H.R. 4537, International Insurance Standards Act of 2018
Floor Situation
On Tuesday, July 10, 2018, the House will consider H.R. 4537, the International Insurance Standards Act of 2018, under suspension of the rules. This bill was introduced on December 4, 2017 by Rep. Sean Duffy (R-WI) and was referred to the House Committee on Financial Services, in addition to the Committee on Rules. The House Committee on Financial Services ordered the bill reported, as amended, by a vote of 56-4 on December 13, 2017.
Summary
H.R. 4537 preserves the state-based system of insurance regulation and provides greater oversight and transparency on international insurance standard negotiations. Specifically, the bill requires that any such agreement entered into by entities representing the U.S. may not be agreed to unless it is consistent with federal and state law as well as recognizing existing federal and state laws on the regulation of insurance. In addition, federal entities participating in negotiations must coordinate and consult with state insurance commissioners throughout the negotiating process. Also, Congress must be consulted that negotiations are set to take place, throughout ongoing negotiations, and prior to entering into any agreement. Finally, the authority is granted to Congress to conduct a “fast-tracked” disapproval process, which also extends to covered agreements.
Background
U.S. insurance companies of every kind, including property-casualty, life, reinsurance, health, and auto, are primarily regulated by the states. Congress and the states have occasionally reviewed the effectiveness of the state-based regulation of insurance and coordinated efforts to achieve greater regulatory uniformity. In 1945, Congress passed the McCarran-Ferguson Act, which confirmed the states’ regulatory authority over insurance except where a federal law expressly provides otherwise. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) affirmed the primacy of the state-based regulatory structure of insurance but it also established a Federal Insurance Office (FIO) at the U.S. Department of the Treasury (Treasury) and charged the FIO director with representing the interests of U.S. insurers during the negotiation of international agreements and advising the Office of the U.S. Trade Representative (USTR) during trade negotiations.
The United States’ state-based regulatory framework is the strongest and most robust insurance regulatory architecture in the world. No other system of insurance regulation combines the state-based focus on policyholder protection with the four, interconnected aspects of consumer protection, solvency protection, market-conduct protection, and resolution protection. Critics of the current U.S. negotiating platform argue that international insurance standards negotiations could be used as a ‘‘back-door’’ method to implement European insurance standards in the United States. The European insurance regulatory model is bank-centric and less policyholder friendly than the U.S. insurance regulatory regime. H.R. 4537 would provide increased transparency throughout the negotiation process and authorizes an approval authority for Congress to ensure that international negotiations recognize the primacy of the current U.S. insurance regulatory framework.
Cost
The Congressional Budget Office (CBO) estimates any budgetary effects of enacting H.R. 4537 would depend, in part, on how often the United States negotiates international insurance agreements and how frequently the negotiators must consult and coordinate with state insurance commissioners. CBO has no basis for predicting that frequency but expects that the cost of such consultations would be less than $500,000 per year.
Staff Contact
For questions or further information please contact Jake Vreeburg with the House Republican Policy Committee by email or at 2-1374.