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HUD rulemaking, capital requirements dominate federal insurance panel at Florida Chamber summit

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It’s no fun when the federal government gets involved in setting insurance rates, a panel of experts told the crowd at the Florida Chamber of Commerce’s annual Insurance Summit – and it’s even worse when international authorities get involved.

John Fitts, deputy general counsel for Progressive’s Legislative & Regulatory Affairs department, likened the possible entry of the federal Department of Housing and Urban Development (HUD) into the insurance environment as a rule-making authority to the Asian carp, an invasive species threatening to overrun the Great Lakes.

HUD is considering how and whether to apply the legal doctrine of “disparate impact” – the idea that a practice is discriminatory if it has a disproportionate impact on legally protected classes such as racial or religious minorities – to home insurance premiums, which would increase the federal government’s involvement in insurance regulation significantly.

That’s a cardinal sin for many people in the insurance industry, not the least of those on stage Tuesday morning.

“My view is that disparate impact, introduced to rate-making for insurance, could screw up our ecosystem,” Fitts said.

He said insurers who “frankly don’t care about protected classes” when evaluating and writing home insurance policies and currently aren’t required to, could be on a collision course with the federal government.

If government advocates who want to enforce the Fair Housing Act by forcing insurers to take such factors into account, Fitts says “it totally turns the process upside down.”

“It creates the potential for litigation, it creates the potential for inconsistent outcomes, and it fundamentally challenges the core of how insurers do business,” he said.

Jon Bergner, federal affairs director for the National Association of Mutual Insurance Companies, agreed and added that insurers will not accept such  changes without a fight.

Bergner said insurers could take heart from past successes in court, winning one recent federal trial opinion that decried the government’s “chutzpah” in attempting to engage insurance markets, finding their application of disparate impact “capricious and arbitrary.”

Bergner said if HUD continues down the path of regulating insurers – which is traditionally overseen by state regulators, a premise codified in federal statute by the 1945 McCarran-Ferguson Act – insurance interests will almost certainly challenge the rule in the Supreme Court.

After a worrisome meditation on the role of federal authorities in the world of insurance, the panel moved on to possible interference in state markets by international authorities.

The specter was raised by international goings-on in which transnational authorities such as the EU and European central banks are requiring financial institutions to raise their minimum levels of capital on hand, a move American insurers hope they will not get bound by way of international transactions.

“It seems to me inevitable that things are going to happen in Europe that are going to be applied to companies that are doing business here internationally,” Fitts said.

Fitts said state regulators could well have to answer to international bodies that seek jurisdiction over U.S.-based companies deemed “internationally active” by the federal government.

“The ramifications of all this and how it plays out are pretty significant,” said Fitts, adding there are “troublesome scenarios” that could find companies operating in Florida answering to international trade bodies.

“Big things are potentially going on outside the state regulatory system,” he said.

Ryan Ray writes about campaigns and public policy in Tampa Bay and across the state. A contributor to and before that, The Florida Squeeze, he covers the Legislature as a member of the Florida Capitol Press Corps and has worked as a staffer on several campaigns. He can be reached at

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