Jobs, data collection and the health of American International Group were among the questions members of a House panel sought answers to as Michael McRaith, new director of the Federal Insurance Office, made his first public appearance as FIO head.
McRaith also said that the study of insurance regulation mandated by the Dodd-Frank Act and due in January “will not be a recycling of anything we have seen before.”
He said the review will be based on the comments we receive, as well as the consultation process we will do.
“The reports will be based on the merits and the substance of the issue,” McRaith said.
“We absolutely do not use old, xeroxed material that has been unexamined,” McRaith said.
Moreover, he said, the FIO plans, “absolutely” to meet the Jan. 12th, 2012 deadline for publishing the report.
McRaith made his comments in appearance before the Subcommittee on Insurance, Housing and Community Opportunity of the House Financial Services Committee.
Rep. Judy Biggert, chairman of the subcommittee, said her biggest concern is that adding a federal layer to insurance regulation will get in the way of creating new jobs, which McRaith said was unfounded.
She said she has heard that because of Dodd-Frank, companies are not expanding their businesses and creating jobs.
“As our country struggles with a slow economic recovery and unemployment at 9.1 percent, should any actions be taken, or are they functioning well?,” Biggert asked McRaith.
She also voiced concern about the uncertainty of insurers having to have higher capital standards if they are forced to operate under rules designed to regulate banks.
In his reply, McRaith said the property and casualty industry is “very competitive,” noting the huge number of industry advertisements, especially during sports.
At the same time, he said the FIO continues to evaluate all aspects of industry regulation, and is trying to determine if there is a better way to protect consumers, to provide affordable coverage, a better way to allow insurers to compete internationally.
McRaith asked Biggert to adopt a “wait and see attitude, because the FSOC will designate insurers as systemically significant.
He also said he plans to work with Roy Woodall, the members of the Financial Stability Oversight Council with insurance expertise, in determining whether an insurers should be designated SIFI.
McRaith said that the FSOC published rules and guidance on the FSOC SIFI issue in 2010, and that the FSOC re-proposed the guidance based on the benefits and insights provided by Woodall,” as well as McRaith’s insights.
He also noted that the FIO is adding jobs: He has advertised to add four new positions at the FIO.
Rep. Luis Gutierrez, D-Ill., ranking minority member of the subcommittee, asked McRaith whether the FIO is making sure that American International Group doesn’t go adrift again.”
Gutierrez acknowledged that, “You are not a regulator, but a monitor, so if you know AIG is failing and disaster is pending, can you call me right away?”
McRaith responded by saying that the FIO “supports the efforts of the Financial Stability Oversight Council, which monitors the solvency of financial institutions.
Asked about SIFI designation of insurers by the FSOC by Rep. Robert Dold, R-Ill., McRaith said, “It is irresponsible for me to answer that question without more information.”
AIG was also an issue of concern to Rep. Steve Stivers, R-Ohio.
Stivers asked McRaith about the current financial status of AIG, and replied that the examinations of AIG has shown that it was not the insurers that caused problems.
At the same time, McRaith cautioned that even though the view is that the insurance components did not cause the financial crisis at AIG, “We should not use that as an example to not explore if we can modernize and improve regulation of insurance.
“We will study all challenges or gaps within the existing insurance system,” McRaith said.
Rep. Robert Hurt, R-Va., and Rep. Nydia Velazquez, D-N.Y., ranking minority member of the House Small Business Committee, voiced concern about burdensome data collection. Hurt said constituents don’t want additional burdens on the private sector, citing the fact that his district has 20 percent unemployment.
“What new and additional burdens will you create?” he asked.
McRaith reiterated in response that the FIO will not be regulating Financial Holding Companies.