While the Dodd-Frank Act largely exempted insurers from any new regulations, it did bequeath one monumental change to the industry - the establishment of the Federal Insurance Office (FIO).
With insurer for the first time answering to a federal regulator, the creation and future of the FIO was the subject of debate at a forum held during the Annual Meeting of the Casualty Actuarial Society. “We are sailing into uncharted waters,” said Steve Broadie, VP – financial policy, Property Casualty Insurers Association of America (PCI).
The FIO debate exists in the larger context of whether insurers should be operate under an optional federal charter (OFC). Opponents of an OFC initially resisted the creation of the FIO, calling it a stalking horse for an OFC, but eventually supported the creation of the office after its powers were circumscribed to only include areas such as data collection and analysis and coordinating the development of federal policy on international prudential insurance issues. “The creation of the FIO was an adjunct to much broader reform legislation triggered by the greatest financial panic since the Great Depression,” said Broadie, noting PCI opposes creation of an OFC. “We knew financial reform would be extensive and believed the industry was under severe peril of duplicative regulation by people who did not understand the insurance industry.”
Accordingly, proponents of a more robust FIO such as Mary Seidel, VP and director – federal affairs, Reinsurance Association of America, question whether the FIO will carry enough wait to be effective. “The FIO has very limited authority to enter into international agreements and pre-empt state law,” Seidel said. “However, the fact that there are international provisions is a positive. There is still a long way to go. We are looking at the implementation of the office and looking for opportunities.”
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