SF 1778

1st Engrossment - 86th Legislature (2009 - 2010) Posted on 02/09/2010 02:23am

A resolution
memorializing the Congress of the United States to oppose enactment of legislation of
the substance and tenor of S. 40/H.R. 3200 -- the National Insurance Act of 2007 --
proposed optional federal charter legislation.

WHEREAS, the current financial crisis facing the United States and the world is causing
Congress and the Administration to review the current regulatory structure presently in force
with the object of revising it; and

WHEREAS, the Federal Reserve Board of Governors, Comptroller of the Currency,
Securities and Exchange Commission, and other federal regulatory institutions failed their
responsibility, causing great harm to the financial system of the United States; and

WHEREAS, the prime example of the failure of the federal regulatory institutions to
exercise their responsibility is AIG; and

WHEREAS, the failure of AIG has been caused by the actions and activities of its holding
company, the regulation of which is the sole responsibility of the federal government; and

WHEREAS, the regulation of AIG's insurance company subsidiaries has been the
responsibility of the state regulators who have fulfilled their responsibilities, which is
demonstrated by the fact that none of the approximately 170 insurance subsidiaries has failed; and

WHEREAS, regulation, oversight, and consumer protection have traditionally and
historically been powers reserved to state governments under the McCarran-Ferguson Act of
1945; and

WHEREAS, state legislatures are more responsive to the needs of their constituents and the
need for insurance products and regulation to meet their state's unique market demands; and

WHEREAS, many states, including Minnesota, have recently enacted and amended state
insurance laws to modernize market regulation and provide insurers with greater ability to
respond to changes in market conditions; and

WHEREAS, state legislatures, the National Conference of Insurance Legislators (NCOIL),
the National Association of Insurance Commissioners (NAIC), and the National Conference of
State Legislators (NCSL) continue to address uniformity issues between states by the adoption
of model laws that address market conduct, product approval, agent and company licensing,
and rate deregulation; and

WHEREAS, new federal legislation to create a national insurance charter is expected to be
introduced in 2009 that will have the potential to fundamentally alter the role of state governments
in the insurance industry, thereby creating an unwieldy and unnecessary federal bureaucracy
proposed without consumer and constituent demand; and

WHEREAS, such initiatives as S. 40/H.R. 3200 -- the National Insurance Act of 2007 --
proposed optional federal charter legislation may bifurcate insurance regulation and result in a
labyrinth of federal and state directives that would promote ambiguity and confusion among
consumers; and

WHEREAS, bills such as S. 40/H.R. 3200 would allow insurance companies choosing a
federal charter to avoid state insurance regulatory oversight and evade important state consumer
protections; and

WHEREAS, the mechanism that would have been set up under S. 40/H.R. 3200 cannot
respond to the unique insurance market dynamics and local constituent concerns present in each
of the 50 states as state regulation does; and

WHEREAS, bills such as S. 40/H.R. 3200 have the potential to compromise state guaranty
fund coverage, and employers could end up absorbing losses otherwise covered by these safety
nets for businesses affected by insolvencies; and

WHEREAS, bills such as S. 40/H.R. 3200 would ultimately impose the costs of a new and
needless federal bureaucracy upon businesses and the public; and

WHEREAS, many state governments derive general revenue dollars from the regulation
of the business of insurance, including nearly $14 billion in premium taxes and $2.7 billion in
fees and assessments generated in 2006 -- of which the state of Minnesota generated over $346
million; and

WHEREAS, bills such as S. 40/H.R. 3200 threaten the loss of over $10 million in state
revenues from insurance fees and assessments, thereby putting at risk the funding of a wide array
of essential state services; NOW, THEREFORE,

BE IT RESOLVED by the Legislature of the State of Minnesota that it joins the National
Conference of Insurance Legislators in expressing its strong opposition to creation of a federal
insurance charter as proposed in S. 40/H.R. 3200 and any other such federal legislation that
would threaten the power of state legislatures, governors, insurance commissioners, and attorneys
general to oversee, regulate, and investigate the business of insurance, and to protect consumers.

BE IT FURTHER RESOLVED that the Secretary of State of the State of Minnesota is
directed to prepare copies of this memorial and transmit them to the President and the Secretary of
the United States Senate, the Speaker and the Clerk of the United States House of Representatives,
the chair and members of the United States Senate Committee on Banking, Housing, and Urban
Affairs, the chair and members of the United States House of Representatives Committee on
Financial Services, and Minnesota's Senators and Representatives in Congress.