McRaith to Face Lawmakers' Questions over How FIO Represents U.S. Interests Abroad

Corrected 5:22 p.m.

A House Financial Services Committee subcommittee, under pressure from domestic insurance interests, is expected to demand that Federal Insurance Office Director Michael McRaith pressure European regulators to bend policy more to the liking of U.S. insurers. 

The June 13 Housing and Insurance Subcommittee hearing comes as the International Association of Insurance Supervisors prepares its final list of global systemically important insurers, and lawmakers will also ask what U.S. governance representatives are doing to shield U.S. insurers from being designated as globally systemically important insurers. 

Back in late March, FSC Subcommittee Chairman on Housing and Insurance, Rep. Randy Neugebauer, R-Texas, told McRaith that current international standard-setting proposals could impose unnecessary costs on insurance consumers and hurt the competitive U.S. marketplace. 

Insurers have expressed concerns that McRaith is not using his voice abroad to fend off unwanted advances from European financial regulators who may prefer to impose capital standards on insurers that do business globally. 

The questions McRaith is likely to face are based on a briefing about 15 to 20 committee staffers had last Wednesday with representatives of insurance and reinsurance trade groups, such as the American Insurance Association, the Reinsurance Association of America (RAA), Property Casualty Insurers Association of America (PCI), the National Association of Mutual Insurance Companies and the American Council of Life Insurers (ACLI.) 

The briefing, though, contends that the government entities represent the industry, not the government, and the Dodd-Frank Act does not support such an assertion.

In the June 10 briefing memo to the subcommittee members, the majority staff characterize the FIO director’s job as “representing the interests of U.S. insurers during the negotiation of international agreements and advising the Office of the U.S. Trade Representative (USTR) during trade negotiations.”

And the jobs of the three FSOC insurance members are described as representing “the perspective of the insurance industry” under the  requirements of the Dodd Frank Act. 

This wording, though, is not found in Title One of the Dodd Frank Act describing FSOC’s duties.

Under Dodd Frank, FIO has a say-so in international agreements regarding insurance regulation. The statute says FIO can represent the federal government in international discussions relating to insurance regulation, coordinate federal efforts and develop federal  policy on prudential aspects of international insurance matters including representing the United States in the IAIS, and assist the Treasury secretary in negotiating covered agreements.

In addition to McRaith, scheduled to testify are Roy Woodall, the appointed insurance expert voting member of the Financial Stability Oversight Council (FSOC), and the NAIC CEO, former Nebraska Senator Ben Nelson, in his first public testimony before Congress since leaving the Senate in December.

The industry hopes that the hearing is the beginning of vigorous oversight over U.S. insurance regulatory involvement in the workings of IAIS and Financial Stability Board (FSB).

"It is very important for Congress to exercise its critical role as lawmakers and provide ongoing oversight to assure that U.S. interests, including the defense of our companies and effective regulatory system, are always pursued by U.S. representatives in international insurance regulatory discussions," says Dave Snyder, PCI's executive in charge of international affairs.

“ACLI will closely monitor the hearing. Although we are not testifying, we’ll issue a statement to the committee,” says a spokesperson for the trade association.

Anoter issue the industry hopes the House subcommittee will raise is concern over the potential for additional regulation from the IAIS’ Common Framework for Supervision of Internationally Active Insurance Groups (ComFrame.) 

McRaith heads the IAIS committee overseeing the ComFrame process and will likely get questions on his role in crafting a product that has become unpopular among vocal industry and NAIC representatives. The industry is characterizing ComFrame’s direction as potentially creating competitive advantages for national/regional U.S. insurers, with possible creation of a new global capital standard and other measures that would create an un-level playing field that disadvantages them.

Governmental insurance representatives did not comment.  

Corrected to show the briefing memo was prepared by committee staff, not industry groups.

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