If a bill rolling back the Federal Insurance Office’s authority should pass, it would limit financial transparency and the effectiveness of regulatory supervision, according to Moody’s Investors Service.

In its Weekly Credit Outlook, Moody’s notes that a subcommittee of the House Financial Services Committee has reported out legislation that would restrict the ability of the FIO to get financial information from insurance companies. The bill, H.R. 3559, the Insurance Data Protection Act of 2011, was sponsored by Steve Stivers (R-Ohio) and was approved along party lines. The vote was 7-5, with Republicans supporting it and Democrats opposing it.

The bill would revoke the authority of the FIO and the Office of Financial Research (OFR), two new entities created by the Dodd-Frank Act, to subpoena data from insurance companies. It would also force the FIO, the OFR, the Financial Stability Oversight Council, and any other federal entity that seeks data about insurance companies to obtain that data through the insurance company’s state regulator, another federal agency, or a public source.

Moody’s says, “Without subpoena powers, the FIO would be unable, in certain circumstances, to gather critical data for identifying and managing systemic risk.”

The rating agency says the bill would limit the “free flow of essential insurance data” to the parties responsible for overseeing the industry, and adds the bill “would prevent sharing non-publicly available information with both the general public and other government agencies, even those charged with analyzing systemic risk.”

Reported originally by PropertyCasualty360.com