NU Online News Service, April 14, 10:35 a.m. EDT
The insurance industry’s interests on the Financial Stability Oversight Council (FSOC) are “inadequately represented” because of the council’s policies, the National Association of Insurance Commissioners (NAIC) told a congressional panel.
The Treasury Department has taken “a very narrow and, in my opinion and the NAIC’s opinion, incorrect view” of the provision establishing the FSOC in the Dodd-Frank law, John Huff, director of insurance in Missouri and a non-voting member of the FSOC, said in testimony before the Oversight and Investigations Subcommittee of the House Financial Services Committee.
Specifically, he said he has been restricted from consulting with his fellow state insurance regulators on matters before the FSOC. He contended that the restrictions contradict “congressional intent and the deference accorded to state insurance regulators in the explicit language” of Dodd-Frank itself.
“But most importantly, it contradicts logic and reason,” Huff told the panel.
“Quite simply, FSOC should want—and the U.S. taxpayers should demand—all the regulatory resources and expertise that their regulators can provide to FSOC’s important work in protecting the U.S. financial system,” he said.
He said the issue is so important that he and Terri Vaughan, NAIC CEO, “sent a public letter to [Treasury Secretary Timothy Geithner] asking for him to rectify this issue.”
He said the NAIC has yet to receive a written reply, but that some accommodations have been made to date, although he declined to disclose what they were.
Rep. Randy Neugebauer, R-Texas, chairman of the oversight panel, charged at the hearing that the FSOC is proceeding to designate certain nonbank financial firms as “systemically important” without any representative at the federal level “who truly understands the business of insurance.”
Neugebauer added, “On top of that, Director John Huff, who is the only insurance expert [non-voting] currently participating on the FSOC, has publicly declared his frustration with his ability to meaningfully participate and provide the regulatory perspective of the insurance sector in these critical discussions.”
Neugebauer said Huff has “even offered additional NAIC staff to support the work of FSOC at no additional cost to the U.S. taxpayers. Unfortunately, his complaints and generous offer have been ignored by the chairman of the council [Geithner].”
Matt Brady, a spokesman for the National Association of Mutual Insurance Companies, commenting on Huff’s testimony, says, “We share Commissioner Huff's concern that important decisions are being made by the FSOC without a sufficient understanding of the insurance industry.”
“[Property and casualty] insurance is very different than other financial products,” Brady adds. “In creating the FSOC, Congress clearly intended for someone with a thorough understanding of those differences to have a voice, and a vote, in the FSOC's decision-making.”