The U.S. Department of the Treasury’s Federal Insurance Office today submitted to Congress and released a report on how to modernize and improve the system of insurance regulation in the United States.

The 65-page report concludes that insurance regulation in the United States is best viewed in terms of a hybrid model, where state and federal oversight play complementary roles and where the roles are defined in terms of the strengths and opportunities that each brings to improving solvency and market conduct regulation. “Regulation at the federal level would improve uniformity, efficiency, and consistency, and it would address concerns with uniform supervision of insurance firms with national and global activities,” the report states.

The report, mandated under Title V of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), makes recommendations in the areas of insurance sector solvency and marketplace regulation. 

The recommendations below come directly from the report:

Areas of Near-Term Reform for the States

1) For material solvency oversight decisions of a discretionary nature, states should develop and implement a process that obligates the appropriate state regulator to first obtain the consent of regulators from other states in which the subject insurer operates.

2) To improve consistency of solvency oversight, states should establish an independent, third-party review mechanism for the National Association of Insurance Commissioners Financial Regulation Standards Accreditation Program.

3) States should develop a uniform and transparent solvency oversight regime for the transfer of risk to reinsurance captives.

4) State-based solvency oversight and capital adequacy regimes should converge toward best practices and uniform standards.

5) States should move forward cautiously with the implementation of principles-based reserving and condition?it upon: (1) the establishment of consistent, binding guidelines to govern regulatory practices that determine whether a domestic insurer complies with accounting and solvency requirements; and (2) attracting and retaining supervisory resources and developing uniform guidelines to monitor supervisory review of principles-based reserving.

6) States should develop corporate governance principles that impose character and fitness expectations on directors and officers appropriate to the size and complexity of the insurer.

7) In the absence of direct federal authority over an insurance group holding company, states should continue to develop approaches to group supervision and address the shortcomings of solo entity supervision.

8) State regulators should build toward effective group supervision by continued attention to supervisory colleges.

9) States should: (1) adopt a uniform approach to address the closing out and netting of qualified contracts with counterparties; and (2) develop requirements for transparent financial reporting regarding the administration of a receivership estate.

10) States should adopt and implement uniform policyholder recovery rules so that policyholders, irrespective of where they reside, receive the same maximum benefits from guaranty funds.

11) States should assess whether or in what manner marital status is an appropriate underwriting or rating consideration.

12) State-based insurance product approval processes should be improved by securing the participation of every state in the Interstate Insurance Product Regulation Commission (IIPRC) and by expanding the products subject to approval by the IIPRC. State regulators should pursue the development of nationally standardized forms and terms, or an interstate compact, to further streamline and improve the regulation of commercial lines.

13) In order to fairly protect consumers in all parts of the United States, every state should adopt and enforce the National Association of Insurance Commissioners Suitability in Annuities Transactions Model Regulation.

14) States should reform market conduct examination and oversight practices and: (1) require state regulators to perform market conduct examinations consistent with the National Association of Insurance Commissioners Market Regulation Handbook; (2) seek information from other regulators before issuing a request to an insurer; (3) develop standards and protocols for contract market conduct examiners; and (4) develop a list of approved contract examiners based on objective qualification standards.

15) States should monitor the impact of different rate regulation regimes on various markets in order to identify rate-related regulatory practices that best foster competitive markets for personal lines insurance consumers.

16) States should develop standards for the appropriate use of data for the pricing of personal lines insurance.

17) States should extend regulatory oversight to vendors that provide insurance score products to insurers.

18) States should identify, adopt, and implement best practices to mitigate losses from natural catastrophes.

Areas for Direct Federal Involvement in Regulation

1) Federal standards and oversight for mortgage insurers should be developed and implemented.

2) To afford nationally uniform treatment of reinsurers, FIO recommends that Treasury and the United States Trade Representative pursue a covered agreement for reinsurance collateral requirements based on the National Association of Insurance Commissioners Credit for Reinsurance Model Law and Regulation.

3) FIO should engage in supervisory colleges to monitor financial stability and identify issues or gaps in the regulation of large national and internationally active insurers.

4) The National Association of Registered Agents and Brokers Reform Act of 2013 should be adopted and its implementation monitored by FIO.

5) FIO will convene and work with federal agencies, state regulators, and other interested parties to develop personal auto insurance policies for U.S. military personnel enforceable across state lines.

6) FIO will work with state regulators to establish pilot programs for rate regulation that seek to maximize the number of insurers offering personal lines products.

7) FIO will study and report on the manner in which personal information is used for insurance pricing and coverage purposes.

8) FIO will consult with Tribal leaders to identify alternatives to improve the accessibility and affordability of insurance on sovereign Native American and Tribal lands.

9) FIO will continue to monitor state progress on implementation of Subtitle B of Title V of the Dodd-Frank Act, which requires states to simplify the collection of surplus lines taxes, and determine whether federal action may be warranted in the near term.

“This report reflects the dynamic nature of the regulatory system for insurers and provides an explicit path for state and federal regulatory entities to calibrate involvement going forward,” said Michael McRaith, Director of the Federal Insurance Office. “We look forward to continuing our work with all stakeholders as the United States moves forward with modernizing insurance regulation.”

The FIO will continue to recommend additional improvements to the U.S. system of insurance regulation that “best integrate the interests of U.S. insurers and consumers,” the report states. “Whether, and to what extent, those improvements will require federal involvement will often depend upon the subject matter, circumstances, and ability and willingness of the states to resolve the underlying issue.”

Read the full report with full details on each of the 27 recommendations here:

Keep checking back with, as Deloitte’s Howard Mills ( and other industry experts will share reactions to the report. 

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