Academy Forms Task Force To Examine Proposed Federal Charters Legislation; Members' Views Sought

Academy Forms Task Force To Examine Proposed Federal Charters Legislation; Members' Views Sought

by The American Academy of Actuaries' Property/Casualty Federal Charters Task Force
With the passage of the Gramm, Leach, Bliley (GLB) Financial Modernization Act, the future for insurers, banks, and securities firms is forever changed. For insurers, one of the first issues to be addressed is federal chartering. Federal charters have the potential to change the competitive landscape of the insurance industry in the United States dramatically.
The debate on federal charters for insurance companies is on the legislative agenda, with four proposals currently on the table. These proposals originate from the American Bankers Insurance Association, the American Insurance Association (a property/casualty bill), the American Council of Life Insurance (a life/health/disability approach), and the Schumer bill.
From the perspective of the bill sponsors, the prime impetus for federal charters is to reduce the myriad of state rules and regulations. An obvious impact of federal chartering would be a change in the insurance industry's barriers to entry. It will be easier for banks and international insurers to enter the U.S. insurance market. Federal regulations could also affect an insurer's market strategy. Quick, comprehensive access to simultaneous markets may encourage innovative product development.
The American Academy of Actuaries has set up the Property/Casualty Federal Charters Task Force (PCFCTF). The task force has three objectives:

Coordinating with other Academy task forces and committees regarding appropriate responses to the proposals

Communicating the major features of the proposals to property/casualty actuaries and soliciting the viewpoints of property/casualty actuaries on these issues

Preparing responses and positions that communicate to decision makers the role property/casualty actuaries should play in supporting public policy objectives

The task force will be representing the members of the American Academy in the federal charters debate; hence the task force needs to know your views. What does the federal charters debate mean to you? To prepare for this debate, the PCFCTF will provide an overview of the proposal during a concurrent session at the CAS Spring Meeting in San Diego. You have an opportunity to voice your opinion, so bring your ideas and comments. How might federal regulation and national charters alter the actuary's role in pricing, regulatory filings and financial statements, and actuarial opinions? Will actuaries be as necessary in the pricing process? Will workload decrease if regulatory requirements are removed? Will there be national rating structures instead of state structures? Will actuarial statements of opinion need to include results of a dynamic financial analysis, measurements of asset-liability management, requirements on reinsurance, or risk securitization in the financial markets?
For additional information on federal charters, please contact Greg Vass and Meredith Detweiler, the Academy staff supporting this effort, at (202) 223-8196.