The Federal Advisory Committee on Insurance (FACI) is expected to come up with some focused recommendations on major insurance themes to the Federal Insurance Office (FIO) when it meets again in March. The recomendations will focus on issues ranging from accessibility and affordability to international supervisory, all under the consideration of an aging global developed-world population.
FIO Director Michael McRaith listened to the reports of three subcommittees and while he said that he appreciated their reports, he also made it clear that he would like to see some formulated recommendations developed now that the FACI has had some time to find its sea legs.
To that end, McRaith will up his role on the calls “to give targeted guidance,” especially in light of significant issues coming up in the interim period.
McRaith also offered the back bench at Treasury’s FIO (if not the Office of Financial Research ) as a resource of data after hearing complaints about a paucity of resources for analysis based on anything more meaningful than high-level anecdotal evidence.
“We are building up our resources internally,” McRaith noted. The FIO will be, the director said, “very receptive to requests.”
Between now and March, it will convene as often as possible to come to some recommendations, McRaith told the FACI members gathered in person at the Treasury or by phone.
Marsh & McLennan companies CEO Brian Duppereault, who agreed to continue to chair the FACI meetings despite planning on retiring from Marsh McLennan early next year, asked for subcommittee reports in advance of the meeting.
The FACI had its first meeting on March 30, 2012, and will have its next public meeting in Washington on March 11, 2013, and while the disparate group of state regulators, industry mavens and consumer advocates has become more congenial with each other, they say the group is still fumbling with both consensus recommendations and a clear path forward.
One regulator member of FACI suggested afterward that she had not been able to make any subcommittee calls on availability and affordability due to the need for advance notice for scheduling and another said what was presented was not what was discussed on the calls. Another acknowledged a lack of consensus among subcommittee members on group supervision concerns.
At the last public FACI on meeting August 6, McRaith created three subcommittees: affordability and accessibility issues, headed by D.C.’s top financial services regulator; international regulatory balance headed by an industry veteran; and a group specifically charged with possible changes to U.S. state insurance laws created by the implementation of an international body’s work known as the International Association of Insurance Supervisors (IAIS)’s ComFrame, headed by New York’s top financial services regulator.
The regulatory balance subcommittee head, Chubb Corporation Chief Operating Officer John Degnan, made the room titter a bit when he suggested the long overdue FIO report on modernization might be stymieing the focus of efforts but received no comfort from McRaith. Degnan’s presentation centered on his frustration with East Coast state regulators publicly proclaiming easements in the wake of Superstorm Sandy, without letting the public know that perhaps insurers were already going to offer such relaxations in the first place.
A Washington regulatory affairs lawyer in attendance suggested the modernization report might come out in December, but the more interesting question is not the timing, but what is in the report and whether it includes a vision of an increased or clarified federal role for the FIO, which serves U.S. interests domestically and abroad. Some of that role has been muddied, perhaps by virtue of the way the FIO statute is written in Dodd-Frank, in recent discussions abroad concerning measures like ComFrame’s proposals on group supervision and any form of capital requirements.
Also, before the next FACI meeting, if things are as on schedule as stated, the Financial Stability Board will be getting recommendations from the IAIS for the identification of Global Systemically Important Insurers (G-SIIs) by the end of the first quarter 2013. McRaith, a key IAIS policy player now, said during the FACI meeting that the FIO is advocating that they adopt a process like the U.S. process for identifying systemically risky insurers.
McRaith told the group he would participate on the next subcommittee conference calls – formerly he had posed questions and the groups had had discussions that pondered more than pointed, according to some members.
For example, consumer advocate Birny Birnbaum, Center for Economic Justice, pointed out that Superstorm Sandy is yet another indication that the U.S. is lacking a national policy on catastrophe insurance and loss mitigation and those problems will be made manifest in the coming weeks and months as claims come in. He discussed privatizing flood insurance and not having people have to figure out if destruction to ravaged homes was done by the wind or someting else after a big storm—it should all be in the homeowner’s policy, he figures. However, this did not come in the form of a recommendation from the subcommittee.
McRaith is looking for substantive recommendations and advice like this, for example, whether he develops it further or not.
Birnbaum, on the accessibility and affordability subcommittee chaired by Washington, D.C., Insurance, Securities and Banking Commissioner William White, wants to advise the FIO on such a comprehensive federal policy in dealing with catastrophes even as a presentation from a FEMA official made it clear the agency was running out of money to pay claims and would not be able to meet all claims without some intervention.
Ed Connor, FEMA’s Deputy Associate Administrator for Insurance, noted the National Flood Insurance Program has $2.9 billion left on its borrowing authority, with $840 million cash on hand; it expects to need an increase in borrowing authority very soon.
While some said that New York insurance regulator Rob Easton, standing in for Department of Financial Services (DFS) Superintendent Ben Lawsky, who is devoting his time to Superstorm Sandy issues in stricken areas of the state, had the most substantive of the three subcommittee reports in his discussion of ComFrame, group supervision and U.S. versus European-imposed and/or bank-centric capital standards, and was cheered by fellow state regulators although none of them really did anything more than share opinions and thoughts, however thoughtful or superficial, on issues, one lawyer stated.
“There was no consensus reached and no advice given to McRaith/the FIO. My sense was that McRaith was looking for more … He wants to avoid ‘sloganeering’ in favor of substance,” one industry representative and observer noted.
Expect that to change and for the FIO to interpret what is in the best interests of the United States as it sees it when it takes the recommendations.