If 2010 taught us anything, it was that the road ahead in 2011 and beyond is one that demands close scrutiny while the regulatory landscape reforms itself. At the heart of this change is the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the key provision of its insurance section, the establishment of the Federal Insurance Office.
The objective of the FIO is to monitor the insurance industry by identifying regulatory gaps or system risk, and to recommend to the new Federal Stability Oversight Council which insurers should be deemed as “non-bank financial holding companies” subject to oversight by the Board of Governors of the Federal Reserve. Another role of the FIO is to work with the U.S. Trade Representative in cases where state law is inconsistent with negotiated international agreements, and to pre-empt state law when it is determined that the state law is inconsistent with a negotiated international agreement or treats a non-U.S. insurer less favorably than a U.S. insurer. It is important to note that the FIO’s pre-emption powers stop there, but many in the industry remain concerned about the prospect of dual state and federal requirements going forward.
One area ripe for such multi-layered requirements exists in a section of Title V that relates to information gathering. The general purpose of this provision is to allow the FIO the ability to collect data from insurance companies in order to determine systemic risk. The law also provides the FIO with the ability to enter into information-sharing agreements with others–the NAIC being a prime contender–to analyze and disseminate data. This, some in the industry fear, sets the stage for not only multi-layered information requests, but the potential compromise of proprietary company information.