The director of the Federal Insurance Office rejects industry and congressional allegations it is somehow conspiring with foreign regulators to establish capital standards that will undermine the competitiveness of U.S. insurers.
In testimony prepared for delivery June 13 to the House Financial Services’ Subcommittee on Housing and Insurance—in what is expected to be the first look at the FIO’s vision for its role in insurance regulation—Director Michael McRaith says he is operating within the agency’s statutory authority.
The FIO has power to coordinate federal efforts and develop federal policy on prudential aspects of international insurance matters, including representing the U.S. in the International Association of Insurance Supervisors.”
The International Association of Insurance Supervisors (IAIS) is a particular focus of industry and congressional concerns, with some industry and congressional sources saying they fear the IAIS will impose “bank-centric” regulatory oversight on U.S. insurers.
According to prepared remarks obtained by PC360, McRaith will clarify the IAIS is advisory in nature—it is not a supervisor—and it “does not have any legal authority to direct or affect the structure or manner through which any jurisdiction regulates its insurance sector.”
Creation of uniform international regulatory standards will make it easier for U.S. insurers to compete in emerging markets, says McRaith.
But the FIO unequivocally represents the U.S., he will reiterate.
“The U.S. insurance sector is diverse and that diversity is reflected in the views of its participants,” McRaith will say. “FIO's priority, however, will always be the best interests of the U.S.-based insurance consumers and industry, and jobs and prosperity for the American people.”
McRaith’s comments are expected to address concerns there is international pressure to change the U.S. insurance regulatory system.
Four trade groups say this pressure to “force” the U.S. to change its regulatory system could “put U.S. insurers doing business abroad at a competitive disadvantage.”
A letter from the groups—the American Insurance Associations, the Property Casualty Insurers Association of America, the National Association of Mutual Insurance Companies, and the Financial Services Roundtable—urges Congress to oppose measures that would change the current system, which worked effectively during the financial crisis, they point out. The groups ask lawmakers involved with international regulation talks to “ensure a level playing field through a focus on outcomes, not the imposition of additional layers of new standards.”
The former state regulator also rejects claims by state insurance regulators that he is usurping state insurance authority.
“We at FIO remain committed to working with the state regulators,” McRaith will say, furthermore making it clear the agency he heads has no intention to conduct day-to-day oversight of insurance business.
“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 U.S. financial system,” McRaith says, according to his prepared testimony.