The first report of the Federal Insurance Office was released today, but this “Annual Report” is not the delayed modernization report mandated by the Dodd-Frank Act, and it makes no controversial observations as to how the industry should be regulated in the future.
FIO Director Michael McRaith will note in testimony during a hearing tomorrow that his office expects to produce a number of additional reports this year, including the report on how to modernize and improve the system of insurance regulation in the United States and, separately, on the breadth, scope and role of the global reinsurance market.
The annual report released today only outlines current key industry issues, such as the low interest rate environment; natural catastrophes and their impact “on individuals, families, businesses, and communities”; the changing demographics in the United States, where the aging of the U.S. population combined with increased life expectancy has increased demand for products that offer lifetime income protection; and growth opportunities in emerging markets.
In a flash report to its members obtained by PC360, the Council of Insurance Agents and Brokers (CIAB) says, “At first blush, the report looks to us to be an accurate and relevant document that puts into context the industry's financial strength and regulation.”
Jimi Grande, senior vice president of Federal and Political Affairs for the National Association of Mutual Insurance Companies, says, “The FIO Annual Report shows the continued strength of the property and casualty insurance industry despite the financial crisis and some of the worst years for natural catastrophes on record. It also highlights the work being done around the world to improve the efficiency and coordination of insurance regulation, which NAMIC believes should be carefully monitored to avoid a negative impact on the healthy and competitive U.S. property and casualty insurance market.
“As the FIO finalizes its report on regulatory modernization for the insurance industry, we hope it will keep the findings of this annual report in mind, and take a cautious approach in recommending changes to a system that has enabled the property/casualty insurance industry to protect consumers through these difficult times.”
The modernization report was mandated under the Dodd-Frank Act, and was supposed to be released to Congress more than a year ago.
Joel Wood, senior vice president of government affairs for CIAB, says he believes that “while it is clear that [McRaith] and his team have had an underlying report — and subsequent revisions — for a considerable length of time, the delay in its release is reflective of the reality that the U.S. Treasury Department has not historically or culturally been focused on issues regarding the insurance industry.”
He notes, “Several members of Congress have loudly complained about the delay, creating some minor buzz and anticipation among we professional insurance lobbyists and observers.”
The Annual Report released today comes on the eve of a congressional hearing that may underscore tensions between the FIO and the National Association of Insurance Commissioners.
McRaith, NAIC CEO Ben Nelson and Roy Woodall, an independent member of the Financial Stability Oversight Council, will testify.
The hearing, which will be held by the Housing and Insurance Subcommittee of the Financial Services Committee, was demanded by state regulators who have complained that the FIO is attempting to usurp the primacy of state insurance regulation with respect to international negotiations.
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