In our latest installment of “Five Questions,” we interviewed Michael McRaith, Director of the Federal Insurance Office (FIO) established under the Dodd-Frank Wall Street Reform and Consumer Protection Act:
What is the Federal Insurance Office (FIO) and what does it do?
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), which the President signed into law last year, established the Federal Insurance Office (FIO) within the Treasury Department.
Among other things, the FIO advises the Secretary of the Treasury on major domestic and prudential international insurance policy issues. As part of this work, we monitor all aspects of the insurance industry, including the availability of affordable insurance to traditionally underserved communities and consumers. The FIO also assists the Secretary in administering the Terrorism Risk Insurance Act, which helps support the market for terrorism risk insurance products.
FIO coordinates Federal efforts and develops Federal policy on prudential aspects of international insurance matters, including representing the United States at the International Association of Insurance Supervisors (IAIS). In doing this, FIO will work closely with the States, particularly on insurance matters of national importance.
Congress gave the FIO authority to identify issues or gaps in the regulation of insurance that could contribute to a systemic crisis in the insurance industry or the broader U.S. financial system, and to make recommendations to the Financial Stability Oversight Council regarding whether an insurer or its affiliates should be subject to supervision by the Board of Governors of the Federal Reserve.
What can we expect from FIO in the coming weeks and months?
We’ll be busy. Over the next several months, FIO will focus on preparing our statutorily-mandated study and report due to Congress in January 2012 on how to modernize and improve the U.S. system of insurance regulation. We expect to consult with consumer advocates, industry stakeholders, academics, state officials, federal agencies, and other insurance sector thought leaders. We’ll soon publish a Federal Register Notice seeking public input.
Treasury also intends to announce members of the Federal Advisory Committee on Insurance, which we’re calling the “FACI.” The FACI will provide advice and recommendations to the FIO. Diverse segments of the insurance sector, academics and consumer advocates will be represented on the FACI.
We will also soon be submitting two statutorily required-reports to Congress: one regarding the state of the insurance industry and another on whether in the last year FIO has acted to preempt any state insurance laws, which it has not.
How do you envision working with the state regulators?
Having been a state regulator recently - I left Illinois for our nation’s capital in June - I am well aware of the quality and professionalism within state insurance regulatory agencies. Tremendously capable, dedicated professionals work in departments of insurance throughout the U.S. I am fortunate to have worked with and learned from many of them about subjects ranging from actuarial guidelines to consumer protection to international regulatory equivalence.
One FIO priority is to establish a constructive working relationship with its state partners. While FIO is not the sector’s day-to-day regulator - states retain that function - we are committed to working with the National Association of Insurance Commissioners (NAIC) to improve the U.S. system of insurance regulation without regard to ideology or parochial interests. In addition to the state insurance regulators, we plan to work with the National Governors Association, the National Association of Attorneys General, the North American Securities Administrators Association, the Council of State Bank Supervisors, and other key officials. The FIO looks forward to building these relationships, and working collaboratively to fulfill its responsibilities in monitoring the insurance sector.
What role does FIO have on the international level?
FIO coordinates federal efforts and policy on prudential aspects of international insurance matters and will represent the United States on those topics in international forums and more formal associations.
Since shortly after it was created, FIO has been a provisional member of IAIS, the coordinating body for international insurance regulatory issues. FIO will become a full member of the IAIS in early October at the IAIS annual meeting in Seoul, South Korea. We are excited to embrace the opportunities presented by full IAIS membership, especially given the current pace of international regulatory developments. For example, the IAIS is working on a process for designating insurers as globally significant, and the EU is evaluating a process for assessing regulatory equivalence.
FIO looks forward to providing the U.S. perspective on these and other important topics at the IAIS. The FIO also anticipates representing the U.S. within other groups in which international insurance matters are addressed.
The Dodd-Frank Act also authorizes the Secretary of the Treasury and the U.S. Trade Representative jointly to negotiate and enter into bilateral or multilateral agreements regarding prudential matters with respect to the business of insurance or reinsurance. FIO will assist the Secretary with those responsibilities.
How did your previous experiences, most recently as head of the Illinois Department of Insurance, prepare you for this newly created position?
Insurance provides essential financial security for businesses and families – financial security that protects not only individual well-being but also economic development and job growth. As a state insurance commissioner, I was privileged to hear from and work with insurance industry leaders, business leaders and consumer and family advocates.
The Illinois Department was like every other state insurance department: responsible for highly technical solvency regulation as well as direct interaction with both business and individual insurance consumers. I worked with individuals and groups representing all political interests, every large and small segment of the industry, and all consumer constituencies. That range of substantive and personal engagement helped me to appreciate fully the importance of effective, efficient insurance oversight, and the positive impact that appropriate oversight can have on both industry and consumers.
In this new role as FIO Director, I look forward to working with federal and state officials, and to direct engagement with all interested parties, in pursuit of the best consumer protections balanced with the most effective promotion of marketplace competition. Competitive markets give consumers more choice and better value.