WASHINGTON BUREAU — John Huff – the state insurance regulators’ representative on the new Financial Stability Oversight Council (FSOC) — today told a congressional panel that he wants the FSOC to let him discuss confidential FSOC matters with other state insurance regulators.
Huff, the Missouri insurance director, and Susan Voss, the Iowa insurance commissioner and president of the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., appeared at a hearing on insurance oversight organized by the Insurance, Housing and Community Subcommittee of the House Financial Services Committee.
The NAIC has appointed Huff to serve as its non-voting representative on the FSOC.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 created the FSOC to help federal financial services regulators track trends and events that could threaten the stability of the U.S. financial system.
Huff has complained in the past that the FSOC does not allow him to discuss confidential FSOC matters with other insurance regulators, and brought up that issue at the hearing.
“[I am] still unable to communicate with my fellow commissioners on a confidential basis regarding the matters under consideration by the FSOC that portend changes to our regulatory process and that could impact insurers and state insurance markets,” Huff said.
The ability of state insurance regulators to provide input regarding FSOC’s important work “remains extremely limited,” Huff said.
Huff said the FSOC might be able to compromise by letting him talk about confidential issues with a
small group of designated regulators representing the needs of different regions and different markets.
“I firmly believe that such consultation will be vitally important in the coming months as the FSOC determines the criteria to be used to identify systemically important non-bank firms and evaluates firms for such designations.” Huff said. “In the event that any insurers are designated, the ability of the FSOC to receive advice and counsel from my fellow insurance regulators who are involved in the day-to-day regulation of such companies will be critical.”
The Dodd-Frank Act also created the Federal Insurance Office (FIO), an arm of the U.S. Treasury Department that is supposed to evaluate the state of insurance regulation.
President Obama has pointed Michael McRaith, a former Illinois insurance director, to lead the FIO.
“To date, the NAIC has had a good relationship with FIO, and we look forward to continuing that relationship going forward,” Voss said.
State regulators are open to hearing FIO suggestions for improving the insurance regulatory system, Voss said.
“We continue to believe there is an inherent conflict in an office of the Treasury Department studying ways to further empower itself,” Voss said.
Voss noted that state insurance regulators have toughened insurance holding company oversight since the financial crisis began in 2007.
Regulators now impose disclosure requirements on any entity within an insurance holding company system that could pose reputational or financial risk to the insurer, Voss said.
Voss also talked about indexed annuity sellers’ concerns that definitions in swaps regulations proposed by the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission could classify fixed annuities as swaps, or security-based swaps.
Voss said she believes it is very important for the agencies to clarify that the swaps definitions do not include insurance products that Congress intended not to be considered swaps.
“Since enactment of the statute, the NAIC has sought clarification from the SEC and CFTC that these definitions do not include insurance products sold by a regulated insurance company,” Voss said. “We believe that we have made significant progress with the agencies in this regard, but we are of the view that certain changes still need to be made to exclude all regulated insurance products.”