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5.1 What Entities are Impacted and How?

<< Title V Overview

5.1 What Entities are Impacted and How?

The following links provide expanded analysis within this section:

5.1.       What Entities are Impacted and How? 

5.1.1.    Impact of the Office.  The Office does not have direct regulatory powers and is not charged with rulemaking.  Nonetheless, the Office can be expected to have both short-term and long-term effects on insurance companies, their affiliates, and state insurance regulators.  In the short term, the Office is directed to make a comprehensive study of the insurance industry, including the costs and benefits of Federal regulation, and in doing so may compel production of information from insurance companies and affiliates, subject to certain safeguards.  The Office may also preempt actions by state regulators if they are inconsistent with international insurance agreements.  In the long term, the greatest impact will occur if the Office recommends Federal regulation of the insurance industry, instead of the 50 state-system currently in place, and Congress implements that recommendation. 

5.1.2.    Impact of State Regulatory Reform.  These provisions primarily affect state regulators and participants in the multi-state commercial insurance markets by imposing limitations and uniform provisions on a state's regulation of: (i) the sale of property and casualty insurance by insurers not admitted to conduct insurance business in the state, and (ii) reinsurance.  Insurance companies and consumers in these markets are intended to benefit from a more efficient regulatory structure. 

5.1.3.    Impact of Other Provisions of the Act.  It is important to note that insurance companies and their affiliates may also be substantially affected by many provisions of the Act other than Title V, depending on their business activities and whether they are affiliated with a bank or BHC.  A few examples: (i) insurance companies or their affiliates may be designated as Significant Nonbanks or may be part of a Large BHC, either of which would be subject to heightened prudential regulation by the Fed; (ii) they may be governed by the Volcker Rule and regulation of derivatives trading (see Paragraph 6.20. for a discussion of the Volcker Rule); and (iii) the sale of insurance products that are considered securities may  be affected by the standard of care applicable to broker-dealers and investment advisers that emerges from SEC rulemaking mandated by the Act.  In addition, a provision known as the "Harkin Amendment" removes equity indexed annuities and certain other insurance products from the SEC's jurisdiction and will eliminate Federal regulatory burdens on issuers of these products and agents that sell them.