Lawmakers and industry and government officials pushed forsupervisory harmony and a robust role abroad by the U.S. FederalInsurance Office (FIO) to increase international competitivenessfor the U.S. insurance industry.

In a May 17 hearing before the Insurance, Housing and CommunityOpportunity Subcommittee of the House Financial ServicesCommittee, chaired by Rep. Judy Biggert, R-Ill., insurers,regulators and consumer advocates were united in emphasizing a needto work together to create clarity and consistency so insurers canexpand their markets abroad.

Insurance executives implored Congress, FIO, the office ofUnited States Trade Representative (USTR) and other officials toemphasize the need to resolve conflicts over trade, transparency,capital standards, conflicting regulatory standards and othersupervisory and free market concerns.

FIO Director Michael McRaith testified that FIO's prioritieswere a strong American economy and job opportunities.

The force and promise of FIO was repeatedly trumpeted intestimony and throughout the hearing. Indeed, there was a chorus ofsupport for FIO's role internationally and even domestically fromall quarters.

“The FIO can be of particular help in ensuring the USTR'ssuccess by using its bully pulpit to advance the interests of theU.S. insurance sector and by coordinating efforts to resolve anyconflicts between the federal government and states over insurance,stated The Council of Insurance Agents and Brokers (CIAB) insubmitted testimony.

“The hearing helped assure that insurance issues have a highplace on the US international-engagement agenda and puts Congresson the field of play in representing U.S. interests, along with theFIO, USTR, other federal agencies and the NAIC,” says David Snyder,vice president of the American Insurance Association(AIA).

Those who testified also waded into how todefine systemically important financial institutions (SIFI),with insurers worrying that designations by the Financial StabilityOversight Council (FSOC) created by Dodd-Frank would furtherdistort competition.

Lawmakers and insurers seemed troubled by the potentialtreatment of insurers by regulators under a bank-centric model withFederal Reserve supervision.

“When a traditional insurance business fails,not every car owner is going to get into a car accident immediatelyupon dissolving, … there is not the same prospect of a run,”McRaith told the panel. FIO is working with the IAIS [InternationalAssociation of Insurance Supervisors] on the “criteria, methodologyand timing” of SIFI designations “so no U.S. insurer isdisadvantaged through global designation of [SIFIs],” McRaith toldlawmakers.

However, McRaith said that, if it had been around several yearsago, the FSOC would have found AIG systemically risky. He stressedthat it is important to look at a company as a whole, not just thetraditional insurance enterprise “and look under the hood” to seeif there is any systemic risk.

NAIC President and Florida Insurance Commissioner Kevin McCartytold the panel that when an insurer, as opposed to a bank, is understress, there is more of a chance for the insurance companies “torebound.” McCarty said to prevent systemic risk, the insuranceenterprises of a company should be walled off.

“For all these reasons, we urge the Federal Reserve and FSOC towork with the IAIS and the FSB, through the FIO and the NAIC,to coordinate the development of frameworks for the management ofdomestic and global SIFIs based on the existing insurancerisk-based framework. This would avoid inefficiency, increasedcosts, the creation of an un-level playing field and resultingmarket distortion,” Toppeta stated.

At the global level, the IAIS is developing aninsurance-specific assessment method to identify globalsystemically important insurers (SIIs, or G-SIFIS as they are knownin the U.S. parlance). Its draft is expected to be released soon,and an IAIS November 2011 Report has already concluded thattraditional insurance activities do not generate or amplifysystemic risk, a MetLife representative pointed out at thehearing.

The IAIS continues its work on prudential measures to apply toglobal SIFIs with a target of end of 2012.

This story orginally appeared on our sister site,LifeHealthPro.com