The Federal Advisory Committee on Insurance (FACI) is meeting Aug. 6 to explore international issues. Some of the topics of discussion will include the work that is to be done on addressing how the insurance industry can serve and address global demographic changes spurred by the aging of the middle class, a subject that was identified at the first meeting in March by Federal Insurance Office (FIO) Director Michael McRaith.
The immediate priority of FACI appears to be a market-focused international supervision, reflecting McRaith’s current priorities for the FIO, as he has stated in Congressional testimony May 17 when he said that the FIO's immediate predominant focus is on international issues.
The first new business item on the agenda is a presentation and discussion regarding the internationalization of the insurance industry, to be delivered by Mike Pritula of consultancy McKinsey & Co. The meeting will take place in the U.S. Treasury building's Cash Room in Washington at 1:30 pm Monday.
McRaith cited in his May 17th testimony before the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity on "U.S. Insurance Sector: International Competitiveness and Jobs" a recent McKinsey study that showed that insurers, including U.S.-based insurers, are now generating almost 33% of premium volume from outside the insurers' home countries.
This will be followed by a discussion on international regulatory activities, discussing the work of the International Association of Insurance Supervisors (IAIS), the Financial Stability Committee and the work done by U.S. and global counterparts on ComFrame, or the Common Framework for the designation of internationally active insurance groups.
The FIO provides a single point of contact and voice for the United States on prudential aspects of international insurance matters which will expand its engagement on international insurance matters and develop federal policy on these issues.
Another big focus for McRaith and FACI will be the European Union-U.S. dialogue, which McRaith has been trying to repair and revive.
“As an alternative to either or both jurisdictions entering into unilateral equivalence exercises, the FIO initiated an EU - U.S. insurance dialogue because the insurance industry based on both sides of the Atlantic needs greater clarity and certainty as to regulatory expectations and capital requirements,” McRaith testified in May. He said the parties have committed to bring these discussions to conclusion by December 2012, so expect a hefty progress report.
The FACI, which is comprised of major insurance industry participants and academics, consumer advocates and state regulators, in addition to McRaith, and is chaired by Brian Duperreault, president and CEO, Marsh & McLennan Companies, created two subcommittees, who are due to deliver on any progress. They are "affordability and accessibility of insurance," whose report will be presented by William P. White, commissioner of Washington, D.C.'s Department of Insurance, Securities and Banking, and "international regulatory balance," to be presented by John Degnan, senior advisor to the CEO, The CHUBB Corp.
Affordability and Accessibility of Insurance Committee members are:
Birny Birnbaum, a consumer advocate, consulting economist and director of the Center for Economic Justice; Virginia Insurance Commissioner Jacqueline K. Cunningham; Loretta Fuller, CEO of Insurance Solutions Associates Inc.; Nevada Insurance Commissioner Scott Kipper; Christopher Mansfield, senior vice president and general counsel of Liberty Mutual Group; and Washington, D.C.‘s White.
International Regulatory Balance Committee members are:
Pennsylvania Insurance Commissioner Michael Consedine, New York Life Insurance CFO Michael E. Sproule, Chubb’s Degnan; New York Department of Financial Services Superintendent Benjamin Lawsky; Scott E. Harrington, of the Wharton School at University of Pennsylvania and a scholar for health policy at the American Enterprise Institute; Connecticut Insurance Commissioner Tom Leonardi, Monica Lindeen, Montana Commissioner of Securities and Insurance and State Auditor; and Sean McGovern, a director and general counsel of Lloyd’s North America, who is the international representative on the panel.
Duperreault will be an ex-officio member of each. The committees met by phone in July for an organizational meeting for both Subcommittees but haven't done lots of work, according to sources.
At the inaugural meeting in March, McRaith showed that the scope of his grasp of insurance regulatory matters reaches far beyond any of the participants’ specific issues, as they were all representing their constituency’s interests. McRaith was able to turn the meeting’s direction on its head by bringing the focus to the demographics issue, and away from the pet issues of many of those on the FACI, such as international regulatory hurdles for larger insurers or aligning global systematically important financial institutions’ (G-SIFI) capital requirements with domestic SIFI requirements. However, with the IAIS and the U.S. criteria now released for identifying these SIFIs, there may be a more robust discussion of these issues now.
The much-awaited FIO report on modernizing the insurance industry, though, has not yet been released, more than seven months after a Dodd-Frank statutory deadline, with suggestions that is caught up in inter and intra-agency bureaucracy.