WASHINGTON—The appointment of Illinois Insurance Director Michael T. McRaith to head the new Federal Insurance Office is drawing praise from inside and outside the insurance industry.

Observers note that Mr. McRaith has considerable experience as a regulator and an industry understanding that dates back to his days as a private lawyer. The fact that he comes from a large state with a large insurance industry also is a plus, they say. His experience makes him up to the job of representing the United States in international insurance regulatory issues.

The office, which is part of the Treasury Department, was created last year by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The office will advise federal authorities on insurance matters, prepare reports and analysis, and have limited pre-emption power over state laws that affect international insurance arrangements. The office also will oversee the federal government's terrorism insurance backstop program.

In addition, the director will serve as a nonvoting member of the Federal Stability Oversight Council.

Treasury Secretary Timothy Geithner announced Mr. McRaith's appointment during last week's meeting of the FSOC. Mr. McRaith brings “a huge amount of expertise and judgment” to the FIO post, according to a transcript of Mr. Geithner's comments.

Observers agreed with the Treasury secretary's assessment.

“I think what he brings to the table is, first and foremost, understanding of the state regulatory system and also of the industry,” said Howard Mills, director and chief adviser of Deloitte Services L.P.'s insurance industry group in New York and a former New York state insurance superintendent. “That is critical. One of the first challenges as first director of FIO is to set the tone of how the federal government and the state agencies interact.”

Mr. McRaith also will set “the tone and tenor that will impact this industry and the way it is regulated for many years to come,” Mr. Mills said.

“I think Mike was probably the most unique person qualified to fill the job, because he equally draws respect from fellow state regulators and those of us who would like to see a more assertive federal pre-emptive regime,” said Joel Wood, senior vp of the Council of Insurance Agents & Brokers in Washington.

Mr. Mills said Mr. McRaith, with whom he worked while both were state insurance regulators, enjoys a “well-earned reputation as a very competent and fair regulator.” He noted that Mr. McRaith had exposure to the industry as a lawyer before assuming the state regulator job six years ago.

Eli Lehrer, vp of the Washington operations for the Chicago-based Heartland Institute, praised Mr. McRaith in a statement as “smart, competent and up to the job before him. He has presided over one of the country's better insurance regulatory systems and does a good job.”

The CIAB's Mr. Wood noted that the FIO's authority to pre-empt state insurance regulations is limited. “I don't think he comes at the job from a mindset of intruding onto state turf and he doesn't have a lot of regulatory authority to do so, but he does now have the bully pulpit and he's smart as hell.”

Messrs. Wood and Mills said they believe Mr. McRaith will perform well in representing the United States internationally.

“I think we have a very able federal director now in respect to international agreements,” Mr. Wood said.

“In recent years, the National Assn. of Insurance Commissioners has been much more involved internationally and Mike has been a part of that,” said Mr. Mills. “I think he has as much international experience as any insurance regulator you'll find in the U.S.”

Mr. Wood also said Mr. McRaith's experience in Illinois is a positive factor.

“He comes from the freest-market state in the country with respect to prior approval of rates and forms,” said Mr. Wood. “He's going to be nobody's lackey, but he has a deep understanding of the industry based on the pre-eminence of Illinois as a domicile for so much of the nation's insurance activity.”

Frank Nutter, president of the Washington-based Reinsurance Assn. of America, also praised the choice. “We believe Director McRaith will bring significant insurance expertise to the office.”

He noted, however, that the White House has yet to appoint a voting member with insurance expertise to FSOC and said the administration should move forward with that appointment.