This article includes reporting from Anthony O'Donnell
When it was created, the Federal Insurance Office was tasked by the Dodd-Frank financial reform law -- the legislation that created the body in the first place -- with producing a number of reports on the insurance industry. Among these was a report on modernization of the insurance industry regulatory structure, while another was purely informational on the state of the U.S. insurance sector. Though both missed their initial deadlines by months, one delay was causing considerable angst in the industry: the regulatory modernization report. Insurers have been waiting to find out exactly how the system of insurance regulation might be changed since the initial deadline of February 2012.
So when smoke finally appeared from the chimney yesterday -- that is, an e-mail blast from the Office indicating that it had released its "first annual report" -- many in the industry flocked to the site to get the insight they had been seeking. Instead, they were greeted by an informational report on the financial state of the insurance industry and what the office thinks are its key issues.
"This report does give a very good summary of the state of the industry, addressing areas of concern such as the low interest rate environment and effect that might have on certain products," Howard Mills of Deloitte told I&T's Anthony O'Donnell. "But the report doesn't really shed any new light on the industry and does not talk about where the regulatory landscape might go."
Or, as it was put on Twitter:
In a webcast later yesterday, FIO director Michael McRaith acknowledged that the first report the organization had gotten around to wasn't the one everyone wanted to see, and that he expects it to be released in the near future.
The whole event has served to "increase anxiety" around the modernization report, Mills says.
"The industry has been eagerly awaiting the FIO's prescription for how the regulation of insurance may change," he explains. "This report will increase their eagerness to see that report and learn if the federal government will indeed become more muscular in the regulation of insurance."
Some indication of that might emerge from a hearing today in a House hearing, "The Impact of International Regulatory Standards on the Competitiveness of U.S. Insurers." on At the time of publication, Director McRaith was testifying on the FIO's relationship with the International Association of Insurance Supervisors. But he opened his testimony with this, according to prepared remarks:
The Federal Insurance Office has the statutory authority to coordinate Federal efforts and develop Federal policy on prudential aspects of international insurance matters, including representing the United States, as appropriate, in the IAIS. FIO does not conduct day-to-day oversight of the business of insurance. Rather, FIO has the responsibility to monitor all aspects of the insurance industry, including identifying issues or gaps in the regulation of insurers that could contribute to a systemic crisis in the insurance industry or the United States financial system.