More than Money: What

1

• More than Money Whats Really at Stake in the
  Quest for Insurance Regulatory Reform?
• Alan Liebowitz
• President
• OMNIA Life (Bermuda) Ltd.

2
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• In the wake of the Gramm-Leach- Bliley Act, Banks
  and Insurance Companies Agree
• Uniformity Efficiency must be brought to
  Insurance Regulation.

3
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• The Problems
• Inconsistent Inefficient Regulation
• Barriers to Product Introduction/ Innovations
• Anti-Competitive Rate Pricing Regulation
• Inconsistent Market Conduct Regulation
• A Patchwork of Privacy Regulation

4
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• How badly do bank-insurance organizations want
  this uniformity?
• Banks and Insurers are willing to pay for Both
  state and federal regulation if the federal
  option promises one set of uniform rules.

5
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• Several organizations have seized on the idea
  that a federal system means loss of revenue for
  states.
• Optional Federal Charter is the only idea that
  does not mean loss of revenue to states.

6
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• The Elements of the Optional Federal Charter
  (OFC)
• Unified Federal Regulator in the Department of
  the Treasury
• Charters National Companies/Agencies
• Regulates Solvency, Market Conduct, Accounting of
  national entities

7
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• States Continue to regulate and license State
  chartered entities
• States Continue to regulate solvency, market
  conduct, and accounting standards for State
  chartered entities.

8
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• Preserves State Premium Tax Structure
• Cost of federal regulation borne by those
  entities that choose it.
• States can use resources previously spent on
  regulating companies that choose national
  regulation for other purposes.

9
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• Preserves State Guaranty System
• Only resorts to federal system if a particular
  state does not meet certain minimum standards.

10
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• For those who have concerns that the dual banking
  system isnt the right model for insurance, go
  home and look at the state and federally
  chartered banks co-existing on the same street.
• Does it appear to you that consumers are harmed
  by having so much choice?

11
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• Why the Interstate Compact wont achieve
  uniformity.
• States are free to join the Compact, or withdraw
  from it, at their leisure.
• States may agree to the Compacts rules for one
  product line but withhold agreement for another.

12
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• The Compacts Catch-22
• To achieve uniformity, States must subordinate
  their right to regulate insurance to the drafters
  of the Compact.
• To retain sovereignty, States will resist
  transferring their adjudicatory powers to the
  Compacts stewards.

13
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• The NAICs proposed solutions will be more than 5
  years in development and who knows how long in
  implementation.
• Model laws, to be uniform, require legislators to
  forfeit their right to legislate.
• Show of hands How many state legislators are
  willing to give up this right?

14
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• Congressional Action will present the same
  dilemma
• House Financial Services Committee Chairman Mike
  Oxley and Subcommittee Chairman Richard Baker
  will create a federal nexus - mandates - that
  require state legislators to give up their right
  to legislate.

15
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• Federal Standards could set minimum federal
  criteria to which states would be free to layer
  additional requirements.
• Far from achieving uniformity, minimum Federal
  Standards would exacerbate the patchwork system
  of disparate state laws, by adding a federal
  regulatory layer.

16
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• Alternatively, federal standards could be
  mandatory and exclusive they would not be an
  alternative to state regulation they would
  replace it.
• State insurance commissioners would become agents
  of the federal government.
• State legislators lose the right to legislate
  insurance questions.

17
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• Optional Federal Charter is the only
  modernization proposal that preserves state
  regulation as it is constructed right now.
• Legislators dont have to decide between
  uniformity and sovereignty.
• States continue to regulate all insurance
  questions in their state, not just those the
  federal government leaves to them.

18
More than Money Whats Really at Stake in the
Quest for Insurance Regulatory Reform?

• Preserving State Insurance Regulation
• The debate about whether Congress will act or
  not is over Congress will introduce reform bills
  this year.