Consumer advocates are questioning whether the Treasury Department should include an actuary as a member of the proposed Federal Advisory Committee on Insurance, citing a potential conflict of interest, among other concerns.

In the letter, Consumer Federation of American officials particularly cited a recent letter to Congress by the American Academy of Actuaries regarding flood insurance legislation, without disclosing that the actuary who wrote the letter is employed by a reinsurer.

In a letter to the Treasury Department, J. Robert Hunter, director of insurance for the Consumer Federation of America, said, “I do not agree that actuaries need to be on the FACI.” He added this is not to say that actuarial expertise “is not needed in your work–it is.”

However, Hunter said, “actuarial expertise is much more suited for subcommittee or staff functional work, for getting into the details under the direction of the members of FACI, than in determining public policy.”

Furthermore, Hunter urged Treasury officials to be “very careful when selecting actuaries for such a purpose.”

He said the “vast majority of actuaries are in the employ, directly or indirectly, of the insurance industry and have a direct conflict-of-interest when making independent decisions.”

Hunter wrote his letter to Jeffrey Goldstein, undersecretary of the Treasury for Finance.

The letter was in response to a June 8 letter to Goldstein by officials of the American Academy of Actuaries, asking that an actuary with insurance expertise be appointed to FACI.

The Treasury Department in a May 13 Federal Register notice asked people to apply to be members of the FACI.

According to the notice, appointments to the FACI will be made with the “objective of creating a diverse and balanced body with a variety of interests, backgrounds, and viewpoints represented” and members who possess “relevant expertise,” officials say in the notice.

The Treasury Department is creating the FACI to implement a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that requires the department to set up a Federal Insurance Office (FIO).

The actuaries wrote a letter to the Treasury dated June 8 saying the department’s efforts to find committee appointees with the necessary diversity and experience “will not be realized if the committee does not include individuals with direct actuarial expertise.”

The actuaries also sent a follow-up letter June 24 to officials of the Financial Stability Oversight Council including Michael McRaith, director of the FIO, about how different insurance is from other financial services entities.

“The regulated insurance sector was not the driver of the recent financial crisis,” the letter said.

It was signed by Jesse Schwartz, chairman of the actuarial group’s Financial Regulatory Reform Task Force.

The letter said that, “Problems encountered by American International Group, Inc. stemmed from financial products sold (outside of AIG’s regulated insurance entities).”

The letter added that, “In the past the insurance sector has not been a source of systemic risk and the impact of insurance company failures has been limited to policyholders and other company stakeholders; insurance company failures have generally had limited impact on the insurance market or the broader economy, with that dynamic persisting in the most recent financial crisis.”