availability and affordability are increasingly mentioned in the same breath, this oversight power provided to the Commission would provide it with a blank check to analyze rates, rating practices and residual market plans in direct competition with state insurance regulators. This would be a situation certainly not intended by the authors of S. 1710. Developing and monitoring criteria for loss reserve adequacy would also provide much room for the Commission to manuever, Finally, the regulatory power of the Commission to determine and how large the premium writings could become in each line Beyond these very extensive powers, the proposed Federal Insurance Commission can issue additional rules and regulations and may have additional powers not specifically enumerated that would assist it in carrying out the provisions of the Act. In fact, the Commission would be empowered to determine what other lines of business incidental to their insurance operations insurers could engage in (Section 202 (e) (8)). In short, almost every aspect of managing a federally chartered insurance company would be subject to in-depth regulatory oversight. 32 Consider also the provision in the proposed legislation that all three commissioners cannot be affiliated with the same political party. This provision clearly acknowledges that political pressures and considerations are expected to impact the operations of the proposed Federal Insurance Commission. In addition, there is a six-year term of office for each of the three commissioners, but no mention is made in the bill of how a commissioner could be removed from office for poor management or bad judgement. In summary, can anyone seriously doubt that economic regulation would not increase given the extent of the powers granted to the Federal Insurance Commission and the political environment in which they would be employed? Sec. 202 (c) (4) of the bill contains another open ended power. This provision would directly unsettle if not severely curtail the securities markets for publicly held insurers. It would additionall pit the proposed Federal Insurance Commission directly against the Securities and Exchange Commission. Under Section 202 (c) (4) The Federal Insurance Commissica has the power to examine, audit and use its other extensive regulatory authorities at its discretion with respect to any "person" exercising or possessing effective control of a federally chartered insurer. Under Section 202 (f) the Commission would require that all those who have such effective control must report periodically "in such form and in such detail as the Commission may prescribe." Consider the implications of these provisions. A major corporation who owns an insurer that is federally chartered would have to open itself up to examination by yet, another federal regulatory body and to issue periodic reports on their ownership. But this would not be limited to corporations; it would ostensibly apply to individual investors, trusts, pension funds and other investors who may have effective control of a federally chartered insurer. The term "effective control" incidentally is not defined It could be interpreted to include situations where 10% or more of an insurers stock was held by one person or organization (The SEC standard for disclosure) or even less than 10% if such stock had very wide distribution. in this legislation. The likelihood of double regulation of controlling interests and securities by the SEC and the Federal Insurance Commission would undoubtedly unsettle the market for insurance equities and make them less attractive to investors. It could in fact lead to a reduction in security prices and to risk capital available to insurers, as well as increased regulation. The effects would be the direct antithesis of the very objectives sought by this legislation. The legislation could have serious implications as regards insurance availability. The Commission is provided authority to prevent certain alien insurers from transacting business anywhere in the U.S., unless such insurers have previously sought a federal charter. It is odd that legislation be contemplated to curtail the insurance market when all indications are that the insurance publics require broader markets than have ever existed. In order to estimate how massive and complex a federal Insurance bureaucracy would become we have tentatively identified the major organizational components which would be required at a minimum to manage its responsibilities. This listing of organiza tional and functional components was established with the understanding that the Federal Insurance Commission would: 1. Have responsibilities in part equal to the FDIC (bank in solvency) and the Comptroller of the Currency (bank chartering operating regulations) 2. Include all programs and responsibilities of the present 3. 4. Federal Insurance Administration in HUD Operate as an independent and self sufficient Federal Agency as outlined in Title I, Section 101(c). Substantially decentralize its line operating personnel into the field to cover the ten federal regions. The following are possible organizational components which would likely be necessary in the proposed Federal Insurance Commission under S. 1710 (*Denotes possible field decentralization). 1. Office of the Commissioner (Immediate staff/Executive Secretariate) 2. Advisory Committee/oversight committees 3. General Counsel (chartering, rule making/legislation, liquidation, federal 6. Management and Data systems (performance monitoring, early 99-073 0 - 78 - 27 35 warning system, management information, programming, data storage) 7. Personnel (employment, training, career development, 8. 9. * 10. * 11. * 12. * 13. * 14. employee safety, upward mobility) Administrative support (procurement, space, contracting, travel, security library, administrative law judges, hearing examiners) Research division: chief economist, standards development, regulatory and policy analysis, program development and evaluation, corporate planning |