Five U.S. senators are asking the Obama administration to move promptly to fill the insurance slot on the Financial Stability Oversight Council as well as to appoint the director of the Federal Insurance Office.
Both posts were created by the Dodd-Frank financial services reform law, but have yet to be filled by the administration.
Under the law, the Senate must confirm the administration’s nominee to the FSOC.
The letter was signed by Sens. Ben Nelson, D-Nebraska; Scott Brown, R-Mass.; David Vitter, R-La.; Jon Tester, D-Mont.; and Tom Harkin, D-Iowa.
“While one non-voting representative of the nation’s state insurance regulators has been appointed to the FSOC, we are very concerned that the other two positions remain vacant as the FSOC continues to make critically important decisions affecting banking and non-banking financial institutions without the benefit of additional insurance expertise and the vote of an insurance industry expert as required by law,” the letter said.
“We urge you and Secretary [Timothy] Geithner to fill these two vacancies promptly, so as not to delay the important work of the FSOC and to ensure that the insurance industry is represented as Congress intended,” the letter concluded.
The FSOC is currently debating the process it will use in determining if an insurance company is a potential risk to the financial system and therefore should be overseen by the Federal Reserve Board, as required by the Dodd-Frank law.
For example, in testimony last week about implementation of Dodd-Frank before the Senate Banking Committee, Sheila Bair, chairman of the Federal Deposit Insurance Corporation, Washington, said that the law gives regulators the authority to ask the Federal Reserve Board to conduct an examination of a company that is being considered for designation as systemically risky.
“By collecting more information in advance of designation, the FSOC can be much more judicious in determining which firms it designates as systemically important financial institutions, or SIFIs,” Ms. Bair said.
“This will minimize both the threat of an unexpected systemic failure and the number of firms that will be subject to additional regulatory requirements under Title I [of the law],” she testified.
The FIO was established to provide the federal government and Congress with a resource for information, statistical and otherwise, about the insurance industry.
Its director will have the job of keeping the Treasury secretary and the FSOC updated on insurance issues, but the FIO will have no insurance regulatory oversight power, according to Dodd-Frank.
In comments late last year, Ben McKay, senior vice president of federal government relations for the Property Casualty Insurers Association of America, Des Plaines, Ill., explained that Washington representatives of the insurance industry are “focused” on regulatory implementation and rule-making, including deliberations over the creation of the FIO and the FSOC’s methodology for determining systemically important companies.
“We want to preserve the legislative intent of the Dodd-Frank Act, as it appropriately distinguishes insurance as very different from other financial sectors and recognizes the strong consumer protections provided by the state regulatory system,” McKay said.