The long-awaited report on recommendations for modernizing and improving insurance regulation will be released “by July.”
Michael McRaith, director of the Federal Insurance Office, made the comment at a meeting today of the agency’s Federal Advisory Committee on Insurance (FACI), held at Treasury Department offices in Washington.
At the same time, McRaith formed a task force under the FIO’s FACI to examine the national implications of the use or possible abuse by life insurers of captives and special purpose vehicles.
This is a huge concern for many publicly-traded companies in the life insurance industry; they are watching regulatory developments with a keen eye, wondering how deep FIO will go.
And, state regulators, who get their cue from the industry, are also concerned about FIO’s intentions.
In comments Friday at a meeting of state legislators, Ben Nelson, NAIC CEO, warned the FIO to “stay in lane,” and not get involved in statutory accounting principle issues that should be the total turf of state regulators.
Larry Mirel, a partner at Nelson Levine DeLuca and Hamilton in Washington, and who created a large captive oversight component as Washington, D.C., insurance commissioner, said the issue is “important.”
Mirel said life insurance companies “should be allowed to develop new mechanisms for transferring risk, such as captives and Special Purpose Vehicles, but the regulators must make sure that those new structures support and do not compromise the solvency of the insurer using them.”
Mirel noted that the current D.C. insurance commissioner, William White, who is also a member of the FACI, said at the meeting that, “how to strike that balance is a major concern for the NAIC and deserves careful attention by the Federal Advisory Committee.”
McRaith also said that all long-awaited reports owed by FIO would be released by July. These include a report on how the government should deal with national catastrophes.
The FIO has come under pressure from members of Congress over release of the FIO report on how state insurance regulation should be modernized. The report was due to be released in January 2012, but the Obama administration decided to hold off out of concerns that it would become a political issue in an election year.
It was mandated by a provision of the Dodd-Frank financial services reform law.