The long-awaited report on recommendations for modernizing and improving insurance regulation will be released “by July.”
Michael McRaith, director of the Federal Insurance Office, made the comment at a meeting today of the agency’s Federal Advisory Committee on Insurance (FACI), held at Treasury Department offices in Washington.
At the same time, McRaith formed a task force under the FIO's FACI to examine the national implications of the use or possible abuse by life insurers of captives and special purpose vehicles.
This is a huge concern for many publicly-traded companies in the life insurance industry; they are watching regulatory developments with a keen eye, wondering how deep FIO will go.
And, state regulators, who get their cue from the industry, are also concerned about FIO’s intentions.
In comments Friday at a meeting of state legislators, Ben Nelson, NAIC CEO, warned the FIO to “stay in lane,” and not get involved in statutory accounting principle issues that should be the total turf of state regulators.
Larry Mirel, a partner at Nelson Levine DeLuca and Hamilton in Washington, and who created a large captive oversight component as Washington, D.C., insurance commissioner, said the issue is “important.”
Mirel said life insurance companies “should be allowed to develop new mechanisms for transferring risk, such as captives and Special Purpose Vehicles, but the regulators must make sure that those new structures support and do not compromise the solvency of the insurer using them.”
Mirel noted that the current D.C. insurance commissioner, William White, who is also a member of the FACI, said at the meeting that, “how to strike that balance is a major concern for the NAIC and deserves careful attention by the Federal Advisory Committee.”
McRaith also said that all long-awaited reports owed by FIO would be released by July. These include a report on how the government should deal with national catastrophes.
The FIO has come under pressure from members of Congress over release of the FIO report on how state insurance regulation should be modernized. The report was due to be released in January 2012, but the Obama administration decided to hold off out of concerns that it would become a political issue in an election year.
It was mandated by a provision of the Dodd-Frank financial services reform law.
Conservative members of Congress are chafing at the bit at the opportunity to use the report’s likely recommendations for greater federal oversight of insurance to criticize the administration for needlessly proposing to expand the federal government.
Rep. Jeb Hensarling, R-Texas, new chairman of the House Financial Services Committee, issued a statement last month demanding release of the long-awaited report.
In an oversight plan submitted to the Committee on Oversight and Government Reform and the Committee on House Administration, the FSC urged the FIO to submit “long overdue reports without further delay.”
Other reports identified as outstanding by the House FSC in its Feb. 15 report include the breadth of the global reinsurance market and the ability of state regulators to access reinsurance information.
The industry, however, is looking forward to release of the report.
Sue Stead, chair of the insurance regulation practice group at Nelson Levine DeLuca and Hamilton in Washington, said she was “encouraged” by McRaith’s comments.
“This is the first time he has provided a clear signal to his advisory committee as to when the reports will be issued,” Stead said.
She said the timeframe “makes sense given the recent confirmation of Jack Lew as Treasury secretary.
“I think the industry, regulators and all of us are going to be surprised by the contents of the modernization report,” Stead said.
“We’re confident the report will be helpful, constructive, authoritative and move the dial in the right direction on issues of regulatory harmonization,” said Joel Wood, senior vice president of government affairs for the Council of Insurance Agents and Brokers.
Culturally, Wood said, “the Treasury Department hasn’t had much engagement on state insurance regulatory issues, so officials have moved cautiously, which is what accounts for the delay.
“But now that FIO is almost fully staffed and has excellent leadership, I think this is the year they’ll hit their stride,” Wood said.