The Obama administration is again postponing release of a report outlining proposals for modernizing insurance regulation that was scheduled to be released last January.
Disclosure of the delay was contained in comments Federal Insurance Office director Michael McRaith is scheduled to make before a House Services Committee panel Thursday and as it released its annual report on the industry.
In his comments, McRaith is scheduled to say that the FIO will release “additional reports this year,” including the report on how to modernize and improve the system of insurance regulation in the U.S.
A separate report on the “breadth, scope and role of the global reinsurance market” will also be released, McRaith is scheduled to say.
The first FIO report merely recites industry facts and figures — and does not make any controversial observations as to how the industry should be regulated in the future.
The report said the key industry issues are the low interest rate environment; natural catastrophes, and their impact “on individuals, families, businesses, and communities”; the changing demographics in the United States, where the aging of the U.S. population, combined with increased life expectancy, has increased demand for products that offer lifetime income protection; and growth opportunities in emerging markets.
The report was released on the eve of a congressional hearing that may underscore tensions between the FIO and the National Association of Insurance Commissioners (NAIC).
The title of the hearing is, “The Impact of International Regulatory Standards on the Competitiveness of U.S. Insurers.”
FIO director Michael McRaith, NAIC CEO Ben Nelson, and Roy Woodall, an independent member of the Financial Stability Oversight Council, will testify.
The hearing is being held by the Housing and Insurance Subcommittee of the Financial Services Committee.
The hearing was demanded by state regulators who have complained that the FIO, since its enactment, is attempting to usurp the primacy of state insurance regulation with respect to international negotiations.
In a flash report to its members obtained by the National Underwriter, the Council of Insurance Agents and Brokers (CIAB) said that, “The actual scholarly and balanced nature of the report, meanwhile, may be seen as somewhat anticlimactic.”
At the same time, Joel Wood, CIAB senior vice president of government affairs, said in the memo to members that, “At first blush, the report looks to us to be an accurate and relevant document that puts into context the industry’s financial strength and regulation.”
In a separate statement, the National Association of Mutual Insurance Companies (NAMIC) said that the report “shows the continued strength of the property/casualty insurance industry despite the financial crisis and some of the worst years for natural catastrophes on record.”
NAMIC added that the report also highlights the work being done around the world to improve the efficiency and coordination of insurance regulation, which NAMIC believes should be carefully monitored to avoid a negative impact on the healthy and competitive U.S. property/casualty insurance market.”
Moreover, the NAMIC statement said that, “As FIO finalizes its report on regulatory modernization for the insurance industry, we hope it will keep the findings of this annual report in mind, and take a cautious approach in recommending changes to a system that has enabled the property/casualty insurance industry to protect consumers through these difficult times.”
The FIO did not comment on whether the report it released today was the modernization report mandated by DFA.
This report was mandated under the Dodd-Frank Act, and was supposed to be released to Congress more than a year ago.
Wood said he believes that, “While it is clear that FIO Director Mike McRaith and his team have had an underlying report (and subsequent revisions) for a considerable length of time, the delay in its release is reflective of the reality that the U.S. Treasury Department has not historically or culturally been focused on issues regarding the insurance industry.”
He noted that, “Several members of Congress have loudly complained about the delay, creating some minor buzz and anticipation among we professional insurance lobbyists and observers.”
In a statement in advance of the hearing, the American Council of Life Insurers said that, “the significant role that life insurers play in the U.S. and global economy is dependent on an efficient regulatory structure.
“We urge that our state regulators and the FIO coordinate closely and cooperate continuously to promote efficient and effective supervision, with due regard to limitations under current U.S. state and federal laws,” said Kimberly Olson Dorgan, ACLI senior vice president, public policy.
“We believe that both FIO and our state regulators must work together to assure that U.S. competitive interests are represented on par with those of our global competitors, FIO from within the U.S. government and our state regulators as participants in supervisory colleges” Dorgan said. “We support their collective efforts, as we believe close coordination and continuous cooperation on that point, both at home and abroad, is essential.”
The American Council of Life Insurers said the report "represents an important contribution to the information base on this vital segment of the U.S. economy. As it relates specifically to the life insurers, the report demonstrates FIO’s understanding and recognition of the financial strength of the industry and key economic issues affecting it."
ACLI felt the report was on target in identifying the low interest rate environment as a challenge to the industry, and changing demographics and growth opportunities in emerging markets representing industry trends.
"Life insurers believe they will play an even greater role in the lives of American families, especially in connection with aging Baby Boomers who are seeking financial security in retirement," ACLI said. "For more than 200 years, life insurers have been providing financial and retirement security to American families. Life insurers look forward to doing the same globally."
However, in the CIAB statement, Wood told his members that, “The CIAB believes it is essential that the U.S. insurance regulatory system needs to speak with a single voice in critical international negotiations, and believes the FIO has a critical and leading role in asserting the interests of the U.S. insurance system.”