The bill passed the House of Representatives yesterday with 233 votes to 186. Its journey through the Senate, however, is expected to be much more difficult, with Democrats keen to curtail any attempts to soften regulation of financial services.
The Financial CHOICE Act promises to radically re-write several key aspects of Dodd-Frank, and scrap the rest, including the Federal Insurance Office (FIO).
Dodd-Frank mandated the FIO to monitor the insurance industry, assist in administering the terrorism risk insurance programme, and coordinate federal involvement and policy making on international insurance matters and negotiations.
But Republicans believe its responsibilities should be given to a new insurance advocate with the power to vote in the Financial Stability Oversight Council, an inter-agency group of federal and state regulators and other financial regulatory experts charged with identifying risks to financial stability under Dodd-Frank.
There are also question marks over the future of Dodd-Frank’s Non-admitted and Reinsurance Reform Act, which the captive insurance industry has long sought to clarify.
Under the Non-admitted and Reinsurance Reform Act, it’s unclear whether independent procurement taxes on the insurance purchased from a captive must be paid to the insured’s home state in addition to the captive domicile.
Various regulatory initiatives have failed to obtain this clarification in recent years. If the Financial CHOICE Act did do away with the Non-admitted and Reinsurance Reform Act, individual state statutes on independent procurement taxes would still be in play.
As one expert commented: “This has been a thorn in the sides of captives with self-procurement tax in various states. While repealing this portion of Dodd-Frank won’t do away with each state’s self-procurement tax statutes, it will take the federal government out of the equation, which is always helpful.”