The Treasury's Federal Insurance Office yesterday announced that it's looking for public comments — with a special focus on systemic risk — as part of a report on modernizing insurance regulations.
The Treasury's Federal Insurance Office yesterday announced that it's looking for public comments — with a special focus on systemic risk — as part of a report on modernizing insurance regulations.
The request for comment ran in the Federal Register yesterday; interest groups and others have until Dec. 16 to submit their input.
The report was mandated by the Dodd-Frank Act. Former Illinois insurance director Michael T. McRaith heads up the Federal Insurance Office.
Specifically, the Treasury and the FIO are looking for comments on systemic-risk regulation in relation to insurance, capital standards and the relationship between capital allocation and liabilities, as well as consumer protection for insurance products and practices — including addressing gaps in the state regulatory framework.
Bob Hunter, director of insurance at the Consumer Federation of America, said his group hasn't started on its response to the request for information, but he expects to hit a number of highlights.
Systemic risk figures prominently in the group's upcoming response, he noted.
“The problem is that if one of these very large insurers goes under and needs hundreds of millions from the guarantee funds, then that's going to put some real pressure on other insurance companies,” Mr. Hunter said. “If one or two companies went under, you could have a domino effect.”
Other issues the CFA expects to address include state regulation on carriers' claims practices and policy rates. Mr. Hunter noted that state insurance cops could do a better job of overseeing both issues, but he added that federal regulators may not necessarily do a better job. Rather, a solution could combine aspects of both state and federal insurance regulation, Mr. Hunter said.
The National Association of Insurance and Financial Advisors, the insurance agents' advocacy group, said it expects to turn in its comments to the FIO and Treasury prior to the deadline.
NAIFA supports state regulation and stands by state insurance regulators' creation of the Interstate Insurance Product Regulation Commission, a multistate group that has developed uniform product standards for life insurance, long-term-care coverage and annuities.
Still, while multistate efforts have worked to introduce products quickly and uniformly without lengthy individual state approval, NAIFA said that life insurance and annuities ought to remain under the oversight of state regulators.
“This has gone a long way to create uniformity,” NAIFA president Robert Miller said of the IIPRC. “We do not believe that life insurance and annuities should be regulated at the federal level.”
Leadership at the National Association of Insurance Commissioners — a group of state insurance regulators — needs to convene before coming up with a set of talking points for its response to the Treasury and the FIO, said Vanessa Sink, a spokeswoman for the NAIC.
Still, the NAIC signaled that it would defend state regulators' role in the world of insurance.
"Notwithstanding the collective relationship we have built with our colleagues at Treasury, we continue to believe there is an inherent bias in a Treasury-developed report that could result in recommendations to empower itself," said Susan E. Voss, NAIC president and Iowa's insurance commissioner.
"We have not been approached by FIO to discuss the specifics of the report or its development," she added, "but we look forward to providing our perspective on the strength of state regulation and reviewing the insights of others."
