Insurance representatives today agreed at a Washington conference that the new Federal Insurance Office (FIO) is an “important single point of contact” at the federal level on insurance issues, especially international ones.
But at a conference of “Insurance Regulation in the United States: Modernization and Improvement,” insurance representatives sitting on three separate panels failed to provide a consensus on what the role of the FIO should be in insurance regulation, and both praised and criticized state regulation.
The conference was convened by the Treasury Department, and chaired by Michael McRaith, FIO director.
The conference was aimed at gaining industry views in advance of a report on insurance modernization that the Treasury must provide by late January.
McRaith cautioned after the hearing that the FIO will meet the deadline, but that the first report will cover only the most important points.
He said, “we intend to be prolific” by providing reports on relevant issues going forward.
Transparency in financial statements and in dealing with consumers was discussed by a number of those who testified at the hearing, and McRaith indicated that it will be one topic covered in the report that DFA mandates be produced by late January.
At its start, Neil Wolin, deputy Treasury secretary, said that before the Dodd-frank Act was passed, there was “no institutional capacity to examine insurance at the federal level.”
He said that, “to be clear regulating the insurance industry is not the job of FIO. The states are.” He said FIO's advisory role is working, and that the FIO will continue to work closely with state regulators to provide the federal perspective.
Wolin said, “We are reaching out in a variety of ways through an outreach process.” He said the FIO will continue to okay an important role in Financial Stability Oversight Council and the International Association of Insurance Supervisors.
The most dramatic moment at the conference was the comment by Walter Bell, chairman of Swiss Re, the Americas.
He said that Solvency II, the European-led effort for uniform capital standards, “is going to happen in Europe, whether it is in six months or a year,” Bell said.
“And it is going to cost us companies,” he stated. Bell said, “There has to be global supervision” because the “world is too small.”
The problem, he said, is “understanding what the regime is.”
Brian Duperreault, CEO of Marsh, Inc., said one role the FIO could play is to help open up protectionist regimes, for example, what happened in the Brazilian insurance markets.
Christopher Mansfield, general counsel of Liberty Mutual, Boston, said, “We welcome the FIO as our federal single point of contact.”
He added that, “We like to think Massachusetts is our group supervisor.”
And John Johns, CEO of Protective Life Insurance, Birmingham, Ala., noted that the amount of life insurance held by Americans is declining, and said, “our country faces a terrible retirement predicament.”
He said that more than two-thirds of baby boomers will not be able to maintain their current lifestyles with what they have, plus Social Security.”
He said he sees some “great strengths” in the state system, and called the National Association of Insurance Commissioners “strong and effective.”
But, he said the structure of the NAIC is a barrier, and says it has a “bottom-up structure,” so much turnover that makes it hard to establish a strategic plan.”
He said there tends to be a focus on headlines, but that the insurance industry has a “strong guaranty fund system in our country.”
At the same time, he said it is hard for a highly fragmented state system to be a global regulator.
Michael Grier, vice chairman of Prudential Insurance, cautioned Treasury officials that, because insurance has not been federally regulated, there needs to be a a lot of education on insurance at the federal level.
He said the FIO’s role in the international debate is important, so the federal government must understand insurance, and not have a “knee jerk reaction to either think insurers are banks or are too complicated and throw up their hands.”
He said it is “enormously important that insurers “differentiate ourselves from banks.”
Grier said that “the consequences of accounting convergence, solvency-vs.-investor-style accounting is very important.”
Regarding “systemically significant,” Grier said it is “more important that we get it right than how we label the companies.”
That is, he said, “How we are different, why we are different; consequences of different treatment; we are not banks.”
J. Robert Hunter, the Consumer Federation of America's longtime Director of Insurance announced that CFA was completing a major study of insurance for the 100 million Americans that are low- and moderate-income Americans a study that allegedly finds unfairness, discrimination and disparate treatment of them by insurers.
"The FIO should collect data that can identify problems with more precision... data similar to what bank regulators are required to gather from lenders under the Home Mortgage Disclosure Act (HMDA) as the first step in identifying and correcting many current insurance abuses that affect America’s low and moder-income Americans consumers," Hunter stated at the insurance summit. CFA offered to help draft the data request for this purpose.
Hunter said the data request, which he offered to help draft, contradicts the bill passed out of a Hosue Financial Srrvices Subcomittee the day before that would strip the FIO and the Office of Financial Research of its Dodd-Frank given authority to subpoena information directly from isnruance companies, if needed. The Housing and Community Opportunity Subcommittee voted 7-5 to approve the bill (HR 3559). See: http://www.lifehealthpro.com/2011/12/09/new-legislation-tries-to-pose-serious-threat-to-fe