October 17, 2007
TO ALL GOVERNORS:
We are requesting that you join us in publicly opposing congressional efforts to establish an
Optional Federal Charter (OFC) for the purposes of regulating the $5.6 trillion insurance
industry. In our view, legislation pending in the US. Congress threatens to preempt state
authority, curtail state revenue and dismantle consumer protections which have safeguarded the
American public for the past 150 years. Accordingly, we respectfully ask that you consider
contacting your state's congressional delegation and urge their opposition to an Optional Federal
Charter.
As you are aware, this past July the National Governors Association (NGA) renewed for two
years its policy position, found in EDC-7.3.1, which states that federal law "should not preempt
or undermine" state authority by any means, including allowing insurers the ability to obtain
federal charters, or through congressional mandate that imposes national standards for
implementation in the states." This action was timely, given that U.S. Senators John Sununu and
Tim Johnson this year reintroduced legislation (S. 40) that would clear the way for the creation
of an Optional Federal Charter. Representatives Ed Royce and Melissa Bean introduced
companion legislation (H.R. 3200) in the U.S. House of Representatives. OFC would apply to
life and property-casualty insurance. An Office of National Insurance would be established
within the Treasury Department.
On October 3rd,the US. House Subcommittee on Capital Markets, Tnsurance,and Government
Sponsored Enterprises held the first of two planned hearings examining the effectiveness of state
regulation. Those testifying before the subcommittee included representatives from the National
Association of Insurance Commissioners, the National Association of Mutual Insurance
Companies, the American Council of Life Insurers, the Council ofInsurance Agents and
Brokers, the American Insurance Association, and the Independent Agents & Brokers of
America.
Proponents contend states will maintain all current authority under this new regulatory scheme.
In reality, there is too much at stake. Passage of such a measure would undoubtedly dilute state
autonomy despite the fact that insurance products are rooted in the contract, tort and social policy
laws of each state where they are sold. Furthermore, state budgets would be impacted as a
significant portion of the $16 billion in annual revenue derived from fees, assessment and
premium taxes becomes at risk in order to fund a new federal bureaucracy. We are also likely to
witness dismantling of the successful state refonns we have worked so hard to implement. These
refonns include the creation of an interstate compact to provide unifonnity across states for
particular insurance products, streamlined processes for rate and Conn filings and reciprocity of
state producer licensing laws.
Most important, consumers, the constituents we serve, appear satisfied with the current level of
service and protection they are receiving. A recent survey of policyholders across the country
finds consumers do NOT want to call Washington to get their questioned answered. The
Consumer Federal of America has testified before Congress that it will, "fight optional charters
with all the strength we can muster."
Moreover, a number of state governmental organizations have joined NGA in adopting policies
and resolutions opposing the preemption of state regulation of insurance including, the National
Conference of State Legislatures, the National Association of Attorneys General, the National
Association of Insurance Commissioners, the Council of State Governments, and the National
Conference of Insurance Legislators.
Governor, we support insurance regulatory modernization efforts moving forward in the states,
and we support a collaborative effort involving NGA, Congress, and industry partners to find
targeted solutions which promote innovation, invigorate the marketplace and protect consumers.
OFC is not the right solution.
We hope that you will join us in a bi-partisan effort to stop this federal attempt to take over state
of
ref,,:ulation insurance and again urge you to contact your state's respective congressional
delegations in that regard.
Thank y~u in advance
athieen
Governor
Sebelills
for YO~leadershiP and SUPP~
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Governor
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Stateof Kansas Stateof Georgia
Attachments:
National Governors Association Policy Position