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WASHINGTON—Insurance groups generally welcome the Federal Insurance Office's call for public comments for its report to Congress on how to modernize and improve U.S. insurance regulation.
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the new FIO, which was established by the law, to conduct a study on modernizing and improving insurance regulation.
The law says the study should be submitted to Congress no later than 18 months after Dodd-Frank became law, which would mean that it should be completed in January.
In a notice published last week in the Federal Register, the office said comments should be submitted by Dec. 16. The FIO request for comment seeks stakeholders' views on 12 specific issues, including how systemic risk regulation should be handled as it applies to insurers, international coordination of insurance regulation, and the cost and benefits of federal insurance regulation.
Although industry groups differ on how much power the federal government should have in regulating insurance, they say the call for comment from stakeholders is key. Groups, including the New York-based Risk & Insurance Management Society Inc., already plan to file comments.
“I think it has great significance,” said Ben McKay, senior vp in the Property Casualty Insurers Assn. of America's Washington office. “This is the first post-Dodd-Frank Act examination of Treasury policy in the area of insurance.”
Since the start of the Great Recession, “there have been dynamic changes at both the state and federal levels. These changes alone warrant, if not demand, a rethinking of federal policy vis-à-vis the business of insurance,” he said.
FIO Director Michael McRaith “is doing everything right and the request for comment is very broad, but his mandate to produce a report to Congress early next year is also very broad,” said Joel Wood, senior vp at the Washington-based Council of Insurance Agents & Brokers. “Considering the newness of the office, it's setting exactly the right tone in terms of reaching out to get all of the stakeholders' views.”
“We're pleased to have an opportunity to provide our perspective on what works well in the regulatory system and identify where it can be improved to be made more efficient,” said a spokesman for the American Insurance Assn. in Washington.
However, the National Assn. of Mutual Insurance Cos. greeted the FIO's move with a bit more skepticism.
“You would have thought in 2,300 pages, Dodd-Frank would have addressed everything it wanted to,” said Jimi Grande, senior vp in NAMIC's Washington office. “Unfortunately, the appetite of Washington to grow led them to include mandates for numerous new studies as well.”
While NAMIC has many concerns about rate regulation and lack of uniformity at the state level, “as someone famous once said, the most terrifying words in English are: "I am from the federal government and I'm here to help,'” Mr. Grande said. “We think that FIO needs to remain an insurance expert and not creep toward another insurance regulator.”
“We're among those who tilt toward an aggressive FIO—not only in representing the industry's international interests but in being the bully pulpit on all kinds of domestic insurance regulatory issues,” said the CIAB's Mr. Wood.
The CIAB, like RIMS and the AIA, supports an expanded federal role in insurance regulation.
“What we would want is an honest assessment by all sectors on what world-class regulation would look like and then set realistic goals toward achieving that result,” said PCI's Mr. McKay.