There are many rumors and few known facts about the report due from the Federal Insurance Office (FIO) to the U.S. Congress, so we went looking for chatter in a vacuum of official explanations--and also got statistics on Dodd-Frank’s rule making track record thus far.
What it says is that the delay is not so unusual and might have been expected.
As of May 1, 2012, a total of 221 Dodd-Frank rule making requirement deadlines have passed. Of these 221 passed deadlines, 148 or 67% have missed their deadlines, according to a new report from Davis Polk & Wardwell LLP.
Almost one-third or 73 requirements have been met with finalized rules, according to the report, which goes out monthly as the Davis Polk Dodd-Frank Progress Report. It is based on empirical data.
In addition, 108 or 27.1% of the 398 total Dodd-Frank required rule makings have been finalized, Davis Polk states.
This includes all agencies, from bank regulators to the Securities and Exchange Commission and the Commodities Futures Trading Commission. There are still 144 rule making requirements that have not yet been proposed, Davis Polk notes. There are actually two other reports besides the high profile “FIO Report” required under the Dodd-Frank Act which are overdue to Congress just from the FIO itself.
The first is an annual report to Congress that was due Sept. 30, 2011, on any actions taken related to preemption of state laws under an international insurance agreement. The second report was also due Sept 30, 2011 on the state of the insurance industry under 31 U.S.C. Sec 313 (n)(2) of Dodd-Frank Act.
Then, there is a scheduled report to Congress due by Sept. 30, 2012, describing the U.S. and global reinsurance markets. Another report, a review of the "Nonadmitted Reinsurance and Reform Act" provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act on the ability of state regulators to access reinsurance information for insurers in their jurisdictions is due by Jan. 1, 2013. It must be updated again by Jan. 1, 2015.
Of course, the delayed report that one everyone is interested in is the study on how to modernize and improve insurance regulation in the United States, which was due 18 months after the effective date of the Dodd-Frank Act, landing it in late January 2012, when it was heavily anticipated.
Key dates slipped and speaking appearances were cancelled by FIO Director Michael McRaith at events around Washington. Of course, McRaith only started at the FIO last June, after having been selected in mid-March 2011 by Treasury Secretary Timothy Geithner.
So, what insight do we have? Not much. Congress was mum. Treasury, where the FIO is housed, is mum. A news post out of the U.K. that the report might not be released after the Presidential election in early November for political reasons, to avoid dustups with the states, were batted down by the Administration, though.
All manner of industry groups and interests, consumer advocate groups and state regulators have already met with the FIO and weighed in with comments, which were due in mid-December 2011, so many are anxious to see how their input is processed by McRaith and his staff.
However, there is no fine or sanction for delays, and no reason to hurry it, other than to assuage anxiety among the insurance industry.
McRaith has promised to be “prolific” in his reports, and certainly could have started on the next one while the Dodd-Frank Act mandated “How To Modernize and Improve Insurance Regulation in the United States” report undergoes continued vetting.
Here is the result of our intelligence-gathering, which amounts to mere guesses from seasoned industry hands, as McRaith and his staff keep the draft document close to the vest:
“The FIO report is going through a tough vetting process because this is an election year and they want to be very careful in terms of the issues they tackle and the fights they pick. As we get further past the January deadline and closer to the election, the timing gets dicier,” one insurance regulatory lawyer in Washington said.
Who needs to vet it? The White House, of course, the Commerce Department, even the Office of Management and Budget, we hear.
Certainly, these and other experts and stakeholders were allowed to weigh in, as well, which has caused further delay.
“It's like a woman putting on make-up to go out!,” emphasized a New York-based company regulatory wiz, an old hand at the multiple facets of insurance supervision.
“Reasons for the delays? Perhaps the over-exuberance of Congress in setting unrealistic goals,” stated one person after quickly reviewing the status of many Dodd-Frank Act deadlines.
“Bureaucracy,” added another person who works with the life insurance industry.
“The rumors behind why the report isn't public yet are all over the map,” said one lobbyist with ties to the Democrats but no insight on delay rationale. “And even though we very much look forward to its release, we have complete confidence that Director McRaith and his staff are dutifully positioning the new office on timely and sensitive issues,” he carefully stated.
Indeed, but the FIO is not a regulator as it strives to point out.
The FIO states its statutory role as the organization that "monitors all aspects of the insurance industry, including identifying issues contributing to systemic risk. The Federal Insurance Office also monitors the availability and affordability of insurance to traditionally underserved populations; advises the Secretary on major domestic insurance policy issues; and develops and coordinates federal policy on international insurance regulatory matters."