U.S. Representative Judy Biggert (R-IL-13) and U.S. Representative Bill Posey (R-FL-15) introduced H.R. 6423, the Insurance Consumer Protection and Solvency Act of 2012.
"The permanent Dodd-Frank bailout fund is a bad approach to banking, and an even worse approach for insurance, which is already regulated effectively at the state level," said Biggert, Chair of the Financial Services Subcommittee on Insurance, Housing and Community Opportunity. "Our legislation will simply ensure that the fog of regulatory uncertainty created by Dodd-Frank doesn't force insurance consumers to pay into a new, federal bailout fund. In Illinois, the insurance sector employs over 114,000 workers, and protecting jobs like these from the unintended consequences of Washington regulation is critical to economic growth."
"Under the new Dodd-Frank law, insurance premiums -- including auto, home and life -- could be assessed a 'tax' to cover the cost of bailing out large and unrelated too-big-to-fail financial firms," Posey said. "It's simply wrong to force average middle-class families to pay a higher auto insurance premium because some large bank in New York made a bad bet on European bonds. But that is what Washington slipped into the Dodd-Frank law. My bill guarantees that your rates won't go up for someone else's poor investment decision."
Among its numerous controversial provisions and regulations, the Dodd-Frank Act gave the Federal Deposit Insurance Corporation (FDIC), a depository regulator, expansive new "Orderly Liquidation Authority" to bail out large Wall Street institutions that Washington regulators deem too-big-to-fail. As written in Dodd-Frank, however, the FDIC could assess insurance companies and their customers for the new fund, even though they are ineligible for a similar bailout and insurance policy holders already are protected by state-level backstops. State solvency funding for property and casualty, as well as life insurance already exists, so this Dodd-Frank provision amounts to double taxation.
"For decades, Congress has recognized state authorities as the primary regulators for insurance," said Posey. "Insurance companies are subject to state procedures for addressing insolvency, and their policyholders are protected by state-administered guaranty funds."
H.R. 6423 explicitly excludes insurance companies from the FDIC's Orderly Liquidation Authority, ensuring that federal regulators cannot look to insurance policyholders as a source of cash for bailout funds to cover failed Wall Street firms.