SITA October 5, 2010 Chuck Chamness President / CEO [email protected].

SITAOctober 5, 2010

Chuck Chamness

President / CEO

[email protected]

• Founded in 1895

• Largest P/C trade association with 1,400 member companies and more than 50% of the U.S. homeowners market and more than 30% of the business insurance market

• Growing, diverse membership

National Association of Mutual Insurance Companies

1. Financial Crisis and Dodd-Frank

2. Insurance Regulation Game Changers

3. Our Mission: A Call to Action

Presentation Outline

Financial Crisis and the Dodd-Frank Act

Chuck ChamnessPresident | CEO National Association of Mutual Insurance CompaniesIndianapolis, Indiana

NAMIC’s Position on Insurance Regulation

• Supports a reformed system of state regulation

– Modernization• Rate Deregulation• Streamlining Licensing• Reformed Market Conduct Examinations• Greater Underwriting Freedom

– Can be done at the state level

NAMIC’s View of the Financial Crisis

Dodd-Frank Act

• The Dodd-Frank Wall Street Reform and Consumer Protection Act

– Systemic Risk/Resolution Authority

– Consumer Protections– Derivatives – Executive Pay– Hedge Funds– Investor Protections– Insurance Office

Implementing Dodd-Frank

• Dodd-Frank is 2300 pages:– Graham Leach Bliley – 145 pages– Sarbanes-Oxley – 66 pages, 16 rules, 6 studies– Creation of the Federal Reserve – 31 pages– U.S. Department of Treasury – 3 pages

• CFTC created 30 team leaders and requested additional $45 million budget

Implementing Dodd-Frank

• Dodd-Frank Creates Federal Insurance Office (FIO) within Treasury

• Mission• Monitor all aspects of insurance industry including regulatory gaps

and advise Secretary on major domestic and prudential international insurance policy issues

• Recommend to Council insurers that should be subject to heightened regulation by Fed

• Assist in the administering of Terrorism Risk Insurance Program• Monitor “traditionally underserved communities” access to

“affordable insurance”

• Will produce annual report on the insurance industry and has 18 months to conduct a study on insurance regulation

Federal Vacancy Number 2010-090RD

• is a permanent, full-time position that will pay a salary from $119,554 to $179,700 per year.

• A successful candidate should have the business acumen to “manage human, financial, and information resources strategically” and the people skills to “build coalitions internally and with other federal agencies, state and local governments, nonprofit and private sector organizations, foreign governments, or international organizations to achieve common goals,”

• will get health insurance, life insurance and a chance to buy long term care insurance.

• Applications are due Oct. 20.

Federal Charter

• Optional Federal Charter – Would put the federal government in the

business of regulating the industry.– House OFC sponsors Rep. Melissa Bean, D-IL,

and Rep. Ed Royce, R-CA – version in this Congress is less optional.

– OFC is DEAD– Freedom from rate regulation unlikely– Federal preemption, very unlikely– Choose your own regulator, extremely unlikely

– But you can have MAR (if you want it)

Insurance Regulation Game Changers

Chuck ChamnessPresident | CEO National Association of Mutual Insurance CompaniesIndianapolis, Indiana

Game Changers

#1 Emerging Consensus – Federal Regulation• Bush and Obama agree: a federal regulatory

agency should oversee insurance• Europe’s Common Market regulation demands it• Consumer Federation of America wants it• Federal Insurance Office established• Systemically significant are touched.• Other financial services already have it

Do insurance companies and agents want it?

Game Changers

#2 Health Insurance Reform• Industry demonized to build case for reform• “Affordability” trumps all other metrics• HHS office created to prevent excess profits and

subsidize state rate regulation• Office attracts “best and brightest” regulators:

Angoff, Larson and Ario• Business model regulated with requirement that

“80% of premium to be used for medical cost”What does this tell us about federal p/c

regulation?

Game Changers

#3 International Issues• EU’s Solvency II Standards – 2012“The NAIC … is not a supervisory authority in its own right … CEIOPS members are

restricted from exchanging information with the NAIC since it is not a competent authority for insurance supervisory purposes.” Committee of European Insurance and Occupational Pensions Supervisors Consultation Paper No. 81.

• Capital standards and dependence on complex models. New governance.

• US equivalence determination• International Accounting Standards convergence of GAP

and SAP

Can we maintain our regulatory identity?

Game Changers

#4 Elections in a Populist Political Environment

• Financial crisis, bailouts, the great recession and Democratic majorities

• Tsunami coming to Washington and state capitols which could produce 70 new members of Congress, 10 new US senators, 500 new state legislators, 37 new governors and insurance commissioners

• Progressive populists v. Tea party populists

Game Changers

#5 US (that’s you and me)

• How do we respond to this new environment?

--This is an opportunity to achieve

long-term, significant and meaningful

reform of state regulation.--

Our Mission:A Call to Action

Chuck ChamnessPresident | CEO National Association of Mutual Insurance CompaniesIndianapolis, Indiana

Our Mutual Mission

• NAMIC a dues-paying member of 32 trades

• We believe our interests are aligned with yours

• We seek to be deferential on state matters where appropriate, sharing or showing credit

• Broaden your perspective on issues

• Adding positive contributions without duplicating your efforts

• Collaborative by nature

Call to Action

• Time to think big– Eliminate prior approval– Establish flex rating– Reverse bad faith bills

• Explain the urgency to your new governor • Get a great Commissioner appointed• Establish the agenda with your legislative champion

The time is now … let’s not look back on this moment with regret!

About NAMIC

Founded in 1895, the National Association of Mutual Insurance Companies (NAMIC) is a full-service national trade association serving the property/casualty insurance industry with more than 1,400 member companies that underwrite more than 40 percent of the property/casualty insurance

premium in the United States.

Thank You

[email protected]