U.S. Treasury Secretary Timothy Geithner's remarks yesterday on the progress of post-Dodd-Frank Act financial reform may serve as a kind of vindication for those who have said that insurance had nothing to do with the financial crisis and, therefore, financial service reform should be directed to other sectors. As we speak, the Federal Insurance Office's (FIO) insurance modernization report due on Jan. 21 has not appeared. Nevertheless, the word "insurance" was absent from Secretary Geithner's Groundhog Day comments, perhaps signifying at least six more weeks of delay for the FIO report.
How much can insurance modernization really matter? Not much compared to issues such as limiting debt leverage globally and winding down the GSEs. Insurance modernization remains well out of sight at Treasury.
Or is there perhaps some other, more ominous reason for omitting mention of insurance and delaying the insurance industry modernization report? Stephen Applebaum, a Chicago-based senior P&C industry analyst with Aite Group, speculates that the FIO report's delay might signify something "more foreboding than a blown bureaucratic deadline":
…numerous large and influential constituents have been impacted and represented in this process; collectively, they hold divergent and nuanced views on the matters under review. As a result, many of the report's recommendations are guaranteed to be poorly received. It is therefore possible that this delay indicates that the U.S. Treasury Department, which is responsible for the FIO, is busy preparing to defend and explain an FIO Report that may displease a much higher percentage of stakeholders than has been anticipated.
Other observers have commented that nothing earth shattering should be expected, and Director Michael McRaith's public language demeanor hasn't suggested anything to the contrary so far. It may be that the FIO insurance industry modernization report's delay represents nothing more than McRaith's failure to navigate the difficulties of his new federal responsibilities sufficiently to produce a draft that meets Treasury's expectations.