Last November, the National Association of ProfessionalInsurance Agents (PIA) became the first association to publiclycall for the repeal of the Federal Insurance Office (FIO).

Over the last year, we've been joined by other stakeholdersseeking to dismantle what can only be described as a temporarylapse in judgement in the aftermath of the Great Recession.

Related: PIA calls for repeal of Federal InsuranceOffice

In 2010, advocates of federal insurance regulation succeeded ingetting the Federal Insurance Office (FIO) established as part ofthe Dodd–Frank Wall Street Reform and Consumer Protection Act.PIA National opposed the creation of the FIO fromthe outset. For over 150 years, the state-based system ofinsurance regulation had successfully protected consumers andcreated a competitive and diverse U.S. insurance market that hasbeen enormously successful over the years. There was no need tojeopardize the state system of regulation. But there are times whenpolicymakers panic and act rashly; the aftermath of the recessionwas such a time, and policymakers overreacted in creating theFIO.

Like most Federal offices, once created, it sought toconsolidate its power. This happened even though the FIO shouldn'thave been formed in the first place. Over the last seven-plus yearsof its existence, the FIO has called for federal regulation ofmortgage insurance; for its inclusion in supervisory colleges withstate regulators; and for uniform national standards for stateguaranty associations. It also issued a report on consumerprotections that was far beyond the scope of its authority. Everyone of these things was an overreach, all well outside itsmandate.

Related: GAO vs. FIO

The FIO also undervalued the insurance industry by rejecting itsexpertise in concurring with Systemically Important FinancialInstitutions (SIFI) designations (which have since been questioned)for nonbank insurance institutions under Dodd-Frank. What's more,the FIO made a bad deal with the European Union on an internationalcovered agreement that could open the door for Europe to impose itsstandards on U.S. insurance markets.

Earlier this year, Congress missed an opportunity to address theimproper exercise of the FIO's authority when the House passed the Financial Creating Hope andOpportunity for Investors, Consumers andEntrepreneurs (CHOICE) Act. In fact, the CHOICE Actwould make the problem worse by folding the FIO into anewly-created mega insurance office called the IndependentInsurance Advocate, which would have vast new authority andvirtually no accountability.

The FIO Reform Act

With the CHOICE Act dead on arrival in the Senate, however, abipartisan bill has been proposed by Congressmen Sean Duffy (R-WI)and Denny Heck (D-WA) called the Federal Insurance Office ReformAct of 2017 (FIO Reform). While PIA National has advocated for andcontinues to seek the full repeal of this office, we support thislegislation, as it will begin to scale back the FIO's authority,particularly on some domestic matters.

Related: Regulators take note: Consumers want betterinsurance technology

Importantly, the bill moves the FIO from an independent realm ofthe Treasury Department into the Department's Office ofInternational Affairs; this will properly subordinate the office tothe Treasury. The office will also be limited to five staffmembers. Since its creation, FIO has gradually expanded itsauthority, so these changes are important steps.

The FIO Reform Act also removes FIO's improper assumption ofcertain duties, like its advisory role to the Financial StabilityOversight Council. FIO will no longer have subpoena power, and itspower to issue reports will be somewhat curtailed. FIO willcontinue to have a role in negotiating international coveredagreements, but the bill requires state insurance commissioners tobe consulted and involved throughout such negotiations. Consistentstate regulatory involvement will provide an important check onFIO's power.

However, the bill should have gone further in scaling back thepower of the FIO. To that end, and short of full repeal, PIA viewsthis legislation as a stepping stone to advocate for the FIO'sdisentanglement in the process of designating systemicallyimportant financial institutions. In keeping with its move to theInternational Affairs Office, FIO should not retain authority tomonitor gaps in U.S. insurance regulation or monitor the access andaffordability of insurance. Such duties give the FIO theopportunity to expand the scope of its power in the future.

While the FIO Reform Act is a step in the right direction toreign in this nascent federal entity, the goal should remain thefull elimination of the Federal Insurance Office, once and for all.We look forward to the FIO of today being a distant memory.

Jon Gentile is vice president of government relations of theNational Association of Professional Insurance Agents. He can bereached by sending email to [email protected]. The opinionsexpressed here are the writer's own.

Related: Repeal, don't replace the Federal InsuranceOffice