Attending a general session on regulatory reform at this week’s ERM symposium, a question on everybody’s mind was who would get the nod as the inaugural director of the newly minted Federal Insurance Office. Another question was what could account for the conspicuous absence of a scheduled speaker, Illinois Department of Insurance Director Michael McRaith, who had been rumored to be a frontrunner for the post.
As it turns out, these were not separate questions as McRaith has been officially tapped by Treasury Secretary Timothy Geithner to run the FIO. Reaction from insurers has been uniformly positive. “Michael McRaith is an experienced regulator, having served as the Director of Insurance for Illinois and in various capacities in connection with the National Association of Insurance Commissioners,” Leigh Ann Pusey, president and CEO of the American Insurance Association said in a statement. “As Director of the FIO, it will be vitally important for him to bring this expertise to bear in helping assure that the U.S. and global insurance regulatory systems are both effective and efficient and support vibrant and competitive private insurance markets.”
National Association of Mutual Insurance Companies president and CEO Charles Chamness agreed that McRaith’s experience would serve him well in his new role. “As both a state regulator and an officer of the National Association of Insurance Commissioners, Director McRaith knows that state insurance departments and the NAIC have an enormous amount of data to draw from, and he knows where to find it,” Chamness said in a statement. “With this knowledge we believe he will be able to fulfill the mandate of FIO without costly, duplicative requests for the same data collected by the states.”
Despite the prominence of the post, it’s is helpful to remember that McRaith will have little regulatory authority and will instead oversee an office largely constructed as an aggregator of data and insurance expertise. This narrow purview may help explain the contrast between the welcoming reception afforded McRaith and the naked hostility aimed at another new regulator mandated by the Dodd-Frank act, proposed Consumer Financial Protection Bureau head Elizabeth Warren.
Moreover, members of the insurance industry have been pressing for a rapid appointment of an FIO director to accompany Missouri Insurance Director John Huff as non-voting members on the 15-member Financial Stability Oversight Council (FSOC) created by the Dodd-Frank Act. “We are pleased that the Department of Treasury has listened to the calls from the insurance sector and congressional leaders from both sides of the aisle to fill this critically important position,” The Property Casualty Insurers Association of America President and CEO David Sampson said in a statement.
With McRaith and Huff onboard, the insurance industry will have a greater voice on the FSOC as it crafts rules regarding which financial services firms represent a systemic risk. Nonetheless, an additional insurance expert who will serve as a voting member on FSOC has yet to be named.
When this full contingent of insurance experts on the FSOC is in place, it will be interesting to see whether the view that insurers do not present a systemic risk will be enshrined in law.
Bill Kenealy is a senior editor with Insurance Networking News.
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