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Federal Regulation of Insurance Under Consideration, Treasury Doc Shows

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The Federal Insurance Office isn’t fooling around.

The FIO, headed by Michael McRaith, at the U.S. Treasury Department put out a notice early on Friday, October 14 in the Federal Register to request comments on how to modernize and improve the system of insurance regulation in the U.S., and specifically put on the table the need for a federal regulator across multiple lines of insurance and any shortcomings in state insurance regulation that might need addressing to better protect consumers.

The FIO said it wants to hear from interested parties on the costs and benefits of potential federal regulation of insurance across various lines of insurance except for health insurance, the notice states.

The central point at issue seems to be the ability of any potential federal regulation or federal regulator to provide “robust consumer protection for policyholders” and any potential consequences of subjecting insurance companies to a federal resolution authority, according to the notice.

The Treasury’s FIO wants views on systemic risk regulation for insurers, capital standards and the relationship between capital allocation and liabilities, consumer protection issues on insurance products, including any “gaps in state regulation,” and access to affordable products across all lines by those traditionally underserved, such as minorities and low-and moderate-income persons.

The Dodd-Frank Act requires the FIO to conduct a study on how to modernize and improve the system of insurance regulation in the U.S.

The degree of national uniformity of state insurance regulation with any excessive, duplicative or outdated insurance regulation or regulatory licensing is under scrutiny by the FIO, which, except for its first annual report to Congress, has been quiet until now.  

Also up for discussion are state insurance guaranty fund systems, including the loss of guaranty fund coverage if an insurance company is subject to a Federal resolution authority.

The list of topics under consideration also show the Treasury is concerned about policyholder protection, including the loss of the priority status of policyholder claims over other unsecured general creditor claims. In the case of life insurance companies, it is concerned enough about the loss of the special status of separate account assets and separate account liabilities to invite comment on the issue.

Of course, those with a more international perspective are free to comment on the international competitiveness of U.S. insurance companies.

The Federal Register notice is titled “Public Input on the Report to Congress on How to Modernize and Improve the System of Insurance Regulation in the United States,” and commenters will have 60 days to reply.

Comment from the industry is expected to be substantial. 


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