State regulators will be important partners to the U.S. Treasury Department as the Federal Insurance Office moves forward on its work, Deputy Treasury Secretary Neil Wolin said at a Dec. 9 conference, adding that “nothing in the Dodd-Frank Act alters the fact that insurance is fundamentally regulated by the states.”
The newly launched FIO is charged under the Dodd-Frank Act, with:
- Monitoring the insurance industry, identifying gaps in regulation, and participating in the Financial Stability Oversight Council – all to help ensure stability in the insurance industry and the broader financial system;
- Developing and coordinating federal policy on prudential aspects of international insurance matters;
- Evaluating the accessibility and affordability of insurance products for low- and middle-income Americans; and
- Advising the Secretary of the Treasury on insurance issues.
Wolin — himself an insurance industry veteran from his days as chief counsel of Hartford Financial Services and later president and COO of its P&C business — noted that the insurance sector constitutes 2% of the U.S. workforce.
Despite this sector’s size and importance, before the Dodd-Frank Act was passed, the Federal government had no central repository for comprehensive insurance expertise. Dodd-Frank fixed this glaring omission so that, through FIO, we will have the institutional capability to develop and coordinate insurance policy at the federal level more effectively than in the past.
Reaction from the industry at the conference to the role FIO should play was mixed. Via coverage from the Wall Street Journal, National Underwriter and BestWire, here are some of the approaches the industry would like to see:
- Protective Life Corp. CEO John D. Johns: A “passport” system for life insurers, overseen by the FIO, that would allow them to operate in multiple states while being regulated by just one.
- Markham McKnight, head of BancorpSouth Inc.’s insurance brokerage: A national licensing registry for agents and brokers.
- Forrest Krutter, secretary of Berkshire Hathaway Inc.: Keep state regulation more or less as is, given its ability to “ring fence” insurance subsidiaries to ensure that they maintain sufficient capital
- Walter Bell, chairman of Swiss Re Americas: Global supervision, including a national system for the U.S. industry that is tied to Europe’s Solvency II regulatory regime.
- Marsh Inc. CEO Brian Duperreault: The FIO should advocate for opening protectionist insurance markets abroad, such as the recent restrictions imposed in Brazil.
- Liberty Mutual General Counsel Christopher Mansfield: FIO is a single point of federal contact, but Massachusetts would remain the company’s group supervisor.
- Prudential Financial Vice Chairman Michael Grier: FIO should play important role in international debates and ensuring the federal government understands the differences between insurers and banks.
- Magna Carta Cos. President and COO John T. Hill II: FIO should focus on “duplicative” regulatory systems that can be burdensome on small companies, as well as “streamlining various state regulatory processes and pushing for more reciprocity in state reporting requirements.”