The FIO Fizzle
Insurance Experts' Forum, February 3, 2012
Author Doug Adams once said he loved to hear the sound of deadlines as they went rushing by.
The insurance industry just felt a collective whoosh emanating from Washington, D.C., as the expected report from the Federal Insurance Office failed to materialize by its January 31 deadline. The report, mandated by the Dodd-Frank Act, was to present a blueprint on how to “modernize and improve the system of insurance regulation in the United States.”
Although the FIO has been tightlipped as to the report’s whereabouts, some feel we may well see it in the coming weeks. As my sainted and long-suffering editor Carrie Burns can attest, missed deadlines do happen. Thus, I can view the FIO’s plight with a good deal of empathy.
This empathy morphed into outright sympathy as I dug back into the Dodd-Frank Act to remind myself of the scope of the report. The list of considerations and factors the report must address is long and daunting including: systemic risk regulation with respect to insurance, capital standards and the relationship between capital allocation and liabilities, and consumer protection for insurance products and practices, including gaps in state regulation. Want more? How about the degree of national uniformity of state insurance regulation, the costs and benefits of potential federal regulation of insurance across its various lines of insurance, and the feasibility of regulating only certain lines of business at the federal level, while leaving other lines of insurance to be regulated at the state level?
Taken individually, each of the considerations is complex and deserving of a great deal of time and effort. Taken as a whole, they represent a veritable mission impossible. Indeed, consider that the National Association Insurance Commissioners and the International Association of Insurance Supervisors allotted themselves three years to craft a common framework regarding group supervision and the size of the task before the FIO become apparent.
The scope of this report seems all the more Himalayan when one considers that the FIO existed only on paper until a few months ago when FIO Director Michael McRaith arrived in D.C. and began to assemble a staff in earnest.
So, when it does come, and what can we expect of the report? Many foresee an endorsement of the existing state-based regulatory efforts with nods toward greater international cooperation and transparency. As Deloitte LLP Director Howard Mills recently put it, he’d “be surprised if we saw any huge surprises in the report.”
Moreover, Mills notes that the challenges the FIO are constantly evolving. I, for one, did not foresee rules emanating from HUD as a threat to the primacy of state-based insurance regulation. Yet, it’s precisely this type of dispute the FIO was designed to address. Considering the stakes here, as well as all the other profound determinations the FIO will have to make in the coming months, I say let them take their time doing it.
Bill Kenealy is a senior editor for Insurance Networking News.
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