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From another perspective one can estimate the potential size of the Federal Insurance Commission by comparing it to the FDIC, after

which it was patterned in part, the Federal Insurance Administration which it would absorb and the Comptroller of the Currency function which conducts parallel and extensive examinations of federally chartered banks. It is not improbable that a Federal Insurance Commission once fully operational would employ several thousand employees both in Washington and the field with an operating budget that could easily exceed 100 million dollars. One need only observ:

that:

... state insurance Departments currently employ an estimated 54

personnel with an operating budget estimated to exceed
$136.5 million.

.. The operating budget of the Federal Deposit Insurance Corporation alone for 1976 was 107 million dollars with 3535 total employees, of which 70 percent were located in the field. The FDIC was responsible for supervising 8979 commercial and mutual savings banks, with assets of $335.3 billion, according to their 1976 Annual Report.

...The Comptroller of the Currency has upwards of 3000 employees with and operating budget in excess of $68 million and is responsible for examining 4600 national and District of

Columbia banks.

...The Federal Insurance Administration has 298 employees and an annual operating budget of more than $7.6 million.

To what extent would duplicate and/or parallel state and federal regulatory systems require an increase in paper work? Let's consider for a moment those areas where separate and different reports would ostensibly be required by both state and federal regulators. The overlap would be extensive for those companies with state charters who join the federal guarantee program.

1. Overall reports on financial condition, investments, claim

2.

3.

4.

5.

reserves, operations.

Early warning systems in operation at both the state and

federal level.

Probable special reports on insurance availability and
affordability that could include closed claims studies.

Reports on rate adequacy to meet minimum reserve requirements.

Reports on rating and classification practices to monitor
potential discrimination.

It is instructive to analyze the implications of this concern for duplicate and parallel reporting. Section 107 (b) of the bill authorizes the Federal Insurance Commission to establish "an early warning system."

Further, it states that "In order to render

possible comparison and thus make available broad financial and statistical data, any such 'early warning system' may include oth federally guaranteed insurers and other insurers." (Emphasis added) The phrase "and other insurers" clearly gives the Federal Insurance Commission the authority to require reports, data, etc. from all insurers even though they may be state chartered and do not participate in the federal guarantee fund.

The goals of insurance regulation were stated in 1960 by the

NA IC to be:

1.

2.

3.

"That insurance coverages desired by the public should be
generally available to the public from licensed insurers;
The cost of such insurance coverages to the public should
be reasonable and not extensive;

That the solvency of insurers should be maintained in the
interest and for the continued protection of their policyholders;

4. That each insured should bear his fair share of insurance

cost."

As evidence of their durability, these principles are just as valid today as they were in 1960. Simply stated, these goals seek to maintain a viable insurance market in which consumers may secure their insurance needs at reasonable costs, in a competitive

environment.

The means of achieving these goals, however, are necessarily complex. While each of these objectives are not necessarily mutually exclusive, they do conflict, to some degree. For instance, it would be simple to insure that "solvency of insurers should be maintained" by requiring that minimum insurance rates be pegged to meet the needs of the least efficient insurers. this would unquestionably lead to excessive insurance prices. The true measure of the efficiency of insurance regulation

But,

is not how well each of the above mentioned objectives is reached by and of itself, but how well they are balanced in the actual

world. In the recent past, in a few states, the regulation

of insurance has been politicized through the simple mechanism of preventing adequate rate levels. While this may have temporarily provided consumers with "bargain price" insurance, in those states where this has occurred the market has become unstable,

resulting in a serious availability crisis. Thus, these shortrun, temporary consumer advantages are quickly lost and, in the long run the insurance public is ill-served by such short-sighted

policies.

It is obvious that to achieve good, balanced insurance regulation, the responsibility for achieving the regulatory ends cannot be "split between competing sovereigns."

Yet, this is exactly what S. 1710 would do. It would create, within the federal establishment. a federal government authority which will compete and share with state government the responsibility to regulate the insurance business.

to

S. 1710 goes considerably beyond its stated objectives authorize the issuance of federal charters to insurance companies and to establish "alternate federal insurance guarantee mechanisms." It will ultimately totally realign and unsettle the competitive structure of the insurance business, leading to considerably greater territorial market concentration in existence today. The effect will be less competition, less service and less public protection. It will also lead to more regulation, more litigation, greater uncertainty and certainly more paper work.

S. 1710 would bring into being, extensive regulatory changes...

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seriously disrupting the operation of the existing state insolvency

protection mechanism. Again, the public will have less protection

than it has today but will pay a greater cost for the reduced

protection.

Additionally, the legislation will undermine the security's

market for publicly held companies, while insurance investments

may well become highly concentrated in only the highest quality blue chip investments.

Finally. S. 1710 will require the establishment of a vast new federal bureaucracy at a time when the President, Congress, businessmen and the electorate have made it clear again and again that what this country requires is less regulation and a contraation of existing federal regulatory agencies. This is particularly valid with respect to the concern for the prospect of concentrated regulatory power in a few hands in Washington.