FIO to Develop and Coordinate Insurance Policy at the Federal Level

The Federal Insurance Office will be able to develop and coordinate insurance policy at the federal level, but Treasury says insurance regulation is still fundamentally state-based.

Deputy Treasury Secretary Neal Wolin says that the newly created Federal Insurance Office, under the leadership of its first director Michael McRaith, will have the "institutional capacity to develop and coordinate insurance policy at the federal level more effectively than in past," according to a recent article by Business Insurance.[1]

Insurance regulation "is not one of FIO's responsibilities."

The creation of the FIO by the Dodd-Frank Act corrected the "glaring omission" of the lack of such capacity, according to Wolin. But the regulation of the insurance industry "is not one of FIO's responsibilities," said Wolin. He also added that:

Nothing in the Dodd-Frank Act alters the fact that insurance is fundamentally regulated by the states.[2]

For his part, McRaith said that the FIO "will not be driven by any ideology" in its study of improvement and modernization of insurance regulation. The study is due to be submitted to the Treasury Department in January, but McRaith has indicated the first report will cover only the most important points, such as transparency in financial statements and consumer relations.[3]

FIO recently held it's first conference: "Insurance Regulation in the United States: Modernization and Improvement."

Both McRaith and Wolin made their comments at the first FIO conference recently held in Washington D.C., entitled, "Insurance Regulation in the United States: Modernization and Improvement." The conference was attended by insurance regulators and industry representatives. McRaith was clear that the conference was not intended to be a panacea to the ongoing debate about FIO's role in insurance regulation:

The question is not whether, but how, we can improve and modernize the insurance regulation in the U.S. We don't expect to reach agreement today. We don't expect everyone to walk out holding hands. What we do expect is a lively discussion of the issues facing the industry.[4]

Generally, the insurance representatives agreed that the FIO was important as a "single point of contact" for insurance issues at the federal level, and especially international insurance issues. With the development of the Solvency II insurance regulatory standards in Europe and emerging markets around the world, many insurers recognize that a global outlook is vital.[5]

FIO must understand the insurance industry and not merely assume that it's like the banking industry.

One of the insurance representatives, Michael Grier, vice chairman of Prudential Insurance, stressed the importance of the federal government gaining, through FIO, a true understanding of the insurance industry, and that it not merely assume insurers are like banks or other financial institutions for regulatory purposes.[6]

A transcript of Deputy Secretary Wolin's remarks is available here.

1. Ideology Won't Drive Insurance Regulation Changes: McRaith, Mark A. Hofmann, Business Insurance, December 9, 2011.
2. Ideology won't drive..., Id.
3. Ideology won't drive..., Id.
4. Industry Reps Agree FIO Important, but Disagree on Role it Should Play, Elizabeth D. Festa and Arthur D. Postal, Property Casualty360, December 9, 2011.
5. Industry Reps Agree..., Id.
6. Industry Reps Agree..., Id.