US Insurers Push For Changes In Financial Overhaul Bill

U.S. Senate efforts to overhaul regulation of U.S. financial markets may not contemplate major changes for insurers, but industry groups are hoping to secure a number of changes ahead of next week's committee consideration of the bill.

"The Washington experience with regulation is bank-centric, which is understandable, but that doesn't always work for our industry," said Leigh Ann Pusey, CEO of the American Insurance Association.

Pusey's group and other representatives of property and casualty companies are hoping for big and small changes in the legislation Senate Banking Committee Chairman Christopher Dodd (D., Conn.) introduced Monday. Their efforts highlight the intense scrutiny lobbyists and the private firms they represent are giving the 1,300-plus-page bill, as well as the detail-intensive debates occurring on a daily basis since the proposal was introduced.

One of the biggest priorities for insurance groups is either carving out their industry or modifying language that could potentially require some members of their industry to contribute to a government fund to wind down large failing financial institutions.

The Senate bill calls for an initial $50 billion fund to primarily be paid for by the biggest financial institutions, but members of the insurance industry are concerned that some of their firms could be required to help contribute if the fund was to be depleted and had to be refilled. The fact that insurers didn't contribute to the financial crisis and don't pose the same risks as other financial firms makes that unfair, said Ben McKay, senior vice president of federal government relations for the Property Casualty Insurers Association of America.

"If you're going to make us pay, you shouldn't make us pay for a more risky firm," McKay said.

Property and casualty insurers, which are regulated at the state level, already contribute to funds to cover a company that becomes insolvent, he said. Making insurers pay again because of risky bets by investment banks and their exotic financial products is unfair, Pusey said.

"Our firms are low risk and low leveraged," she said.

Lobbyists are hoping that they can eliminate insurers having to pay into the systemic fund all together. If not that, McKay said, they hope for provisions that would give companies credit for paying into state insolvency funds, or would charge firms premiums based on their risk profile.

On Friday, a group of the largest property and casualty firms, including Allstate Corp. (ALL) and Chubb Corp. (CB), sent a letter to Dodd and Sen. Richard Shelby (R., Ala.) expressing their concerns.

"This approach is fundamentally at odds with the overall purposes of the legislation," said the letter from the Property & Casualty Leaders Coalition.

Insurers are also focused on making sure they escape oversight by a new consumer protection bureau and influencing the creation of a new insurance-focused office within the Treasury Department. The latter issue is a touchy one among insurers because of the long-standing debate within the industry about whether their business should remain under state oversight, or if there should be the option of a federal insurance charter.

The Dodd bill would create an Office of National Insurance, which would be able to work with international regulators on insurance matters and collect data from individual companies. McKay said insurers are wary of provisions that would allow the new office to subpoena a wide range of data from individual companies, as well as its ability to pre-empt state laws in certain instances. Complying with a whole new regulator's requirements could be costly for firms, he said.

"There is a false belief in Washington that data is cheap," he said.

-By Michael R. Crittenden, Dow Jones Newswires; 202 862 9273; michael.crittenden@dowjones.com

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