Pending FIO Insurance Regulatory Modernization Report Still Pending

Already well past the deadline for its insurance regulation modernization report, the FIO faces a looming deadline on its global reinsurance report.
The Federal Insurance Office ("FIO") was authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") in 2010, and the first Director of FIO, former Illinois Insurance Director Michael McRaith, took office in June of 2011.[1]

At the time, proponents of FIO insisted that insurance regulation was not among its responsibilities.
At the time, Deputy Treasury Secretary Neal Wolin said the creation of FIO would correct the "glaring omission" of any federal "institutional capacity to develop and coordinate insurance policy...". Regulation of the insurance industry was not part of FIO's responsibilities, according to Wolin and others who indicated that neither FIO nor the Dodd-Frank Act altered the fact that insurance is primarily regulated by the states.[2]

Under the Dodd-Frank Act, FIO was directed to study and prepare a report to Congress regarding the improvement and modernization of insurance regulation in the United States. This report was initially due in January of 2012.[3]

In February, 2012, FIO was hard at work and expected the report in "the coming weeks."
In February of 2012, a spokesperson for the U.S. Treasury indicated that FIO was "hard at work preparing [its] first report on how to improve and modernize the system of insurance regulation in the U.S." According to the Treasury spokesperson, FIO expected "to send the report to Congress in the coming weeks."[4]

As Insurance Regulatory Law discussed at the time, many in the insurance industry were watching FIO with interest and expecting the modernization report to potentially be a critical indicator of the future of federal involvement in domestic insurance regulation.[5]

In July of 2012, an opinion piece in Business Insurance noted that FIO's insurance modernization report was still overdue.
Those with long memories will recall that the report was supposed to be presented to Congress by the end of January. And those with an understanding of how Washington too often works know that such deadlines often aren't met. We said in March that we weren't “troubled” that the report was a little late.

Well, now it's more than a little late. The insurance industry and its customers—including risk managers—ought to know what FIO has in mind for improving the regulation of insurance.[6]
While the Business Insurance piece did not expect the FIO report to call for significant direct federal involvement in insurance regulation, it did indicate that the report, and FIO itself, could have a major impact on the future of insurance regulation:
Still, the FIO can greatly influence how insurance is regulated. It can prod states to reform and modernize regulatory practices. As the first-ever federal-level insurance authority, the FIO also should play a critical role in presenting U.S. views in international insurance regulatory forums.

The report will give a clear indication of how the FIO plans to approach its job. With elections looming, we hope the report is issued soon, and the sooner the better.[7]
Also as noted by Business Insurance in July, the FIO set its sights "on crafting another report—this one on reinsurance." That report is due to Congress no later than September 30, 2012.[8]

This refers to the report to Congress that the Dodd-Frack Act requires FIO to make regarding the global reinsurance market and the critical role it plays in the U.S. insurance industry.[9]

There are no signs of FIO's reinsurance report yet, but from a political angle, FIO may have an easier time making the reinsurance report deadline than the insurance modernization report deadline.

"Sources with knowledge" allege that the FIO modernization report has been delayed for political reasons.
In April, the Insurance Insider reported that the FIO modernization report could be delayed until after the U.S. presidential elections in November of 2012, citing "sources with knowledge of the situation" that said the "White House is unlikely to risk a confrontation with states and governors over state rights as well as a potential gridlock in Congress at a time when the US legislation process has ground to a halt...".[10]

Missing a federally-legislated deadline by 9 months (and counting) may not have a significant effect on the future of insurance regulation, but it could illustrate a weakness in the arguments of those proponents of increased federal insurance regulation who decry the inefficiencies of the state-based system.


1The First Director of the Federal Insurance Office Takes the Reins, Insurance Regulatory Law, June 13, 2011.
2FIO to Develop and Coordinate Insurance Policy at the Federal Level, Insurance Regulatory Law, December 12, 2011.
3. The Dodd-Frank Act, Title V, Subtitle A, Section 502.
4FIO Still Working on Overdue Modernization of Insurance Regulation Report, Insurance Regulatory Law, February 7, 2012.
5FIO Still Working..., id.
6Opinion: Federal Insurance Office regulatory report looks to be MIA, Business Insurance, July 15, 2012.
7Opinion: Federal Insurance..., id.
8Opinion: Federal Insurance..., id.
9. The Dodd-Frank Act, Title V, Subtitle A, Section 502.
10FIO report could be delayed post-US election date, Insurance Insider, April 23, 2012.

No comments:

Post a Comment