Federal Insurance Office Up and Running

When the “Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010” (Dodd-Frank) was signed into law, it also created the Federal Insurance Office (FIO), a non-regulatory insurance information office tasked with keeping the nation’s policymakers up to speed on insurance issues. The FIO has taken shape over the last few months, starting with the appointment of Michael McRaith, former Illinois insurance commissioner, as FIO director.

Generally speaking, the main duties of the FIO include updating the Treasury Secretary, the Financial Stability Oversight Council (FSOC), Congress and the Administration on the status of national insurance issues, as well as assisting the U.S. Trade Representative on the negotiation of certain international insurance agreements and representing the U.S. in the International Association of Insurance Supervisors (IAIS). The office is also tasked with monitoring the extent to which underserved communities have access to affordable insurance and conduct a number of studies directed in Dodd-Frank. However, the office has no regulatory authority and is to only act as an information-gathering body.

Congress has already begun scrutinizing the office and its responsibilities with the U.S. House Financial Services Subcommittee on Insurance, Housing and Community Development recently holding a hearing on “Insurance Oversight: Policy Implications for U.S. Consumers, Businesses and Jobs, Part 2.” The hearing examined the powers and actions by the FIO and the office’s plans to fulfill its mandate as laid out in Dodd-Frank. The only witness was FIO Director McRaith in his first appearance before Congress in this position.

In his opening remarks before the House committee, McRaith addressed the lack of regulatory authority and said that the role of the FIO is to work closely with the state insurance departments, which will remain the regulators of the insurance industry. In fulfilling its role as an insurance information source for the federal government, he explicitly said that as required by statue, the FIO will only request information from the industry if it is not already available from public sources, a federal agency or a state regulator. Largely due to Big “I” advocacy during consideration of Dodd-Frank, there is a specific exemption from mandatory data requests for insurance agents and brokers written into law.

During the question and answer portion of the hearing, Chairman Judy Biggert (R-Ill.) asked McRaith to reiterate and assure the subcommittee that he shared the view that the office would not have regulatory authority over the insurance market. He responded to the chairman that the FIO, as mandated by Dodd-Frank, is not a regulator or supervisor and that insurance regulation remains the authority of the states.

One of the first duties required of FIO will be to conduct a study and issue a report on how to “modernize and improve the system of insurance regulation in the United States,” and IIABA will be submitting comments to FIO representing the independent insurance agent and broker perspective. This upcoming study prompted questions from both Reps. Steve Stivers (R-Ohio) and Brad Sherman (D-Calif.). The congressmen focused on the fact that the study needs to take a fresh look at insurance regulation without bias from previous Treasury studies. The subcommittee requested assurance that the study was going to be a “de novo” review of the insurance regulatory system. McRaith addressed the committee’s concerns and said that “any possible bias would be framed by the statute.” The statute requires the FIO to study 12 factors and give consideration to all of those factors when developing any possible recommendations on ways to modernize regulation of the market. McRaith urged all interested parties to submit comments by Dec. 16, 2011. The Big “I” immediately went to work on its comments; they will be available at IAmagazine.com in mid-December.

The U.S. Treasury Department recently announced their list of 15 appointees to the Federal Advisory Committee on Insurance (FACI). FACI is charged with providing advice, recommendations and analysis to the FIO on issues related to its responsibilities.

The association was proud that a Maryland Big “I” agent, Loretta Fuller, AAI, CRIS, was appointed to FACI. Fuller is CEO and CFO of Insurance Solutions Associates in Landover, Md., and an active member of the Maryland Big “I,” serving on the Independent Insurance Agents of Maryland Legislative Committee.

Seven of the FACI appointees are state insurance regulators. According to a Treasury statement, the remaining members of the committee were chosen to bring a “diverse set of perspectives to the industry” and include a consumer advocate, an academic and other representatives of the business of insurance.

—M.T.