Insurers and reinsurers believe the long-overdue Federal Insurance Office (FIO) report on modernising US insurance regulation will be short on market-changing recommendations but are split over what size the report will be when it is finally released.
Speakers on a panel discussion on regulation at Reactions’ Inaugural Midwest Re/Insurance Conference in Chicago on April 30 believe the long-waiting time for the report means that any controversial elements will have been removed.
The FIO was set up under the Dodd-Frank Act. The office was initially supposed to submit the report in January 2012. Recent comments from Michael McRaith, director of the FIO, suggest the report is imminent.
“A couple of weeks ago Director McRaith said that the FIO report would get issued by July, which kind of begs the question July of what year?” joked Michele Oshman, chief deputy director, Illinois Department of Insurance, at the conference.
Edward Collins, vice-president and assistant general counsel at Allstate, said the report will likely provide a good summary of insurance regulation.
“Some are saying we may have federal regulation
“But I am not expecting a very ambitious report in terms of recommendations. That is probably going to come in a subsequent stage but we are optimistic that the FIO is going to play an important and positive role going forward in this evolution of regulation. I think the report is going to be the very first step in moving forward in that direction.”
Matthew Wulf, vice-president of state relations and assistant general counsel at the Reinsurance Association of America, replied: “I agree with almost everything except the length of the report. I think it started out as a voluminous report but it’s been embedded through every channel of Treasury and the Administration that you can think of and my guess is it is going to come out very short. You’ll be shocked to hear this: Washington is very political and I think they drafted a very good report and somebody said: ‘No, this could be used in an election.’ Unfortunately it is going to be Washington-ized and shrunk down. That would be my guess. It’s the only thing shrinking in Washington – the
Michael Stern, vice-president, state government and industry affairs at Ace Group, said it will differ by company how positively the report is received.
“No matter what is in the report, it is going to be looked at through the filter of whether a company supports federal regulation or state based regulation,” he said. “That debate has gone on for years, and it will continue to go on. So a report that says the federal government should be X, Y and Z will be looked upon more favourably by a company that would support that than a company that enjoys the state-based regulatory environment that we have today.”
When asked what they were most worried about regarding the report, panellists said they were concerned about the report falling short of advancing the process to improve and modernise regulation, such as making the state system work more efficiently by ensuring more uniformity and consistency.
Ace’s Stern said it was no longer clear what the point of the report is. “What is the cause? I couldn’t even begin to describe it,” he said. “It started out as one thing, and when it is released it is going to be something quite different.”
The Illinois Department of Insurance’s Oshman added: “For me, the issue that will be disappointing is if it concentrates on who needs to do what as opposed to what needs to be done.”
Regardless of the content of the report, Wulf at the RAA noted that there is likely to be tensions between the FIO and the National Association of Insurance Commissioners (NAIC). He related a conversation he had at a recent NAIC meeting.
“The NAIC hired former Senator Ben Nelson as their CEO because they clearly wanted access to the Hill but one of the direct quotes from a regulator that I spoke to, who will remain nameless, said Ben Nelson was brought on to ‘kill’ Mike McRaith,” said Wulf. “You’ve heard Ben Nelson saying: ‘Stay in your lane, stay in your lane.’”
The discussion was chaired by Andrew Holland, partner at Sidley Austin.