Treasury Deputy Secretary Neal Wolin told London stockbrokerslast week that the Obama administration believes the new financialservices reform law gives it the power to monitor the insurancesector and coordinate and develop federal policy on major domesticand international insurance issues.

His comments were made in a speech to the London StockExchange.

Mr. Wolin said that the federal government for the first timewill be actively involved in international insurance issues.

He said the 2008 financial crisis "highlighted the lack ofexpertise within our federal government regarding the insuranceindustry. In response, the act establishes the Federal InsuranceOffice, which will provide the U.S. Government–for the firsttime–dedicated expertise regarding the insurance industry."

In general, Mr. Wolin added, thenew Federal Insurance Office will monitor the insurance industry tolook for problems or gaps in insurance regulation that cancontribute to a systemic crisis in the insurance industry or thefinancial system, gather data and information on the industry andinsurers, and coordinate policy in the insurance sector.

The administration's views of its broad authority for insuranceunder the Dodd-Frank law appear to conflict with the views ofindustry officials.

In letters regarding specific provisions of the law–for example,the "Volcker Rule" and creation of the Financial StabilityOversight Council–industry trade groups and individual institutionsare advancing the view that they are already regulated and any attempts by the federalgovernment to monitor their activities will be intrusive andillegal dual regulation.

(The Volcker provision seeks to impose stronger federaloversight on financial services companies that engage inproprietary trading and enter into joint ventures with hedge fundsand private equity funds. See related article on page 6 of the Nov.15 edition.)

Mr. Wolin discussed the issue by saying the law does not providethe Federal Insurance Office with general supervisory or regulatoryauthority over the business of insurance.

"The states remain the functional regulators," he said.

But through the FIO, "the federal government will work towardmodernizing and improving our system of insurance regulation," hesaid.

He said that with the FIO, the Treasury Department "is nowbetter able to work with other nations to increase internationalcooperation on insurance regulation, enhancing our collectiveefforts in addressing risks posed to the financial system."

He added that FIO is in the process of becoming a member of theInternational Association of Insurance Supervisors, where it willrepresent the United States.

"The Secretary of the Treasury, together with the United StatesTrade Representative, is now empowered to negotiate certaininternational agreements regarding prudential insurance measures,and the FIO will assist the Secretary," he said.

"We anticipate that the FIO will be actively involved, forexample, in working with the representatives of other countries onreinsurance collateral and U.S. equivalence under Solvency II," hesaid.