Last week, the Big “I” sent a letter to U.S. House of Representatives Financial Services Committee Chairman Jeb Hensarling (R-Texas) voicing support for the state-based system of insurance regulation. The letter also expressed concerns regarding a recent proposal that would restructure the Federal Insurance Office (FIO) to create the Office of the Independent Insurance Advocate (IIA).

In June, Chairman Hensarling released a discussion draft of the “Financial CHOICE Act,” a proposal to reform the financial services regulatory system. The plan would repeal, revise or replace many significant sections of Dodd-Frank. Most relevant to Big “I” members, Title V of the discussion draft would combine the FIO and the Financial Stability Oversight Council (FSOC) Independent Member with insurance expertise to create the IIA.

While the IIA would have many of the same responsibilities as the current FIO, some key changes would occur. Like the FIO now, the IIA would not be a regulator and would monitor the insurance industry to identify gaps in regulation that could pose systemic risk, in consultation with state regulators. Unlike the FIO, the IIA would be an independent office housed at the U.S. Department of the Treasury. Currently, the FIO director reports to the Treasury Secretary.

Additionally, the President would appoint the IIA director and the U.S. Senate would confirm them, instead of appointment by the Treasury Secretary with no Senate confirmation. The IIA would serve as a voting member on FSOC, much like the Independent Member with insurance expertise does now. Finally, some additional provisions would moderately limit the authority of this new office.

Based on the initial discussion draft, the Big “I” has some concerns that unintended consequences for state insurance regulation may result from combining the FIO and FSOC Independent Member into the IIA with a larger profile in Washington, D.C.. For decades, the Big “I” has been a leading supporter of state regulation of insurance. The association opposes any form of federal regulation of insurance, whether optional, mandatory or dual.

To protect the U.S. state-based system of insurance regulation, the Big “I” will continue to work with members of the House Financial Services Committee and their staff as this legislation progresses. 

Jennifer Webb is Big “I” federal government affairs counsel.