Dodd-Frank vs. Dodd-Frank

“In a sense, you have two facets of Dodd-Frank arguably working in conflict with one another,” Caligiuri says. “What remains to be seen is how effective the federal government will be in recognizing how different insurance is from banking and, as a result, have the regulations reflect those differences as well as an actual functional respect for the ongoing role of state insurance regulators.”

The quality of the federal government’s understanding of how the insurance industry actually work “will impact the effectiveness of the federal government’s oversight role over insurance to whatever extent is decided in the final rule,” Caligiuri says.

Eric Arnold, a partner specializing in insurance regulation at Sutherland, Asbill & Brennan L.L.P., Washington, notes that, in letters in commenting on the FSOC’s initial criteria proposal, the insurance industry has questioned the FSOC’s authority to promulgate a regulation that provides no analytical framework for determining whether an insurer constitutes a potential threat to financial stability.

Congress is pressing the FSOC to wait until the FIO director post is filled and an independent insurance expert is serving on the FSOC before promulgating a rule establishing insurer systemic risk determination criteria, Arnold says.