In 2010, advocates of federal insurance regulation created the Federal Insurance Office (FIO) as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). After proponents of an expansive role of the federal government in insurance regulation failed in their efforts to create a stronger office, the newly created FIO was given a limited mandate.
Yet, over the nearly 10 years since its creation, the FIO has continuously tried to increase its duties and expand the role of the federal government in insurance. For instance, the FIO has called for federal regulation of mortgage insurance and for the FIO’s engagement in supervisory colleges with state regulators. The agency also has recommended uniform national standards for state guaranty associations.
The FIO is now trying to expand its authority by facilitating the establishment of the National Association of Registered Agents and Brokers (NARAB), a role not within the scope of its statutory authority.
The National Association of Professional Insurance Agents (PIA National) firmly believes the insurance industry must throw its weight behind repealing the FIO once and for all.
Damaging and redundant
Even within its mandate, the FIO has been damaging and redundant. The FIO made a bad deal in its most recent covered agreement with the European Union (EU). The covered agreement allows Europe to impose its regulatory standards on U.S. regulated insurance markets, shuts out Congress and state regulators, and imposes new requirements on U.S. companies.
In addition, the FIO concurred with the creation of a designation for insurers of a “systemically important financial institution (SIFI),” which was opposed by the Financial Stability Oversight Council’s (FSOC) independent member with insurance expertise and the non-voting representative for state regulators.
What’s more, the FIO is not needed to manage federal programs: it’s currently tasked with overseeing the Terrorism Risk Insurance Program (TRIP), but TRIP was successfully managed by the U.S. Department of the Treasury for nearly a decade before the FIO was created. As demonstrated from 2002 to 2010, this vitally important program can be managed in the absence of the FIO.
PIA National agrees that international negotiations can have a major impact on domestic insurance. The U.S. should be well represented at international venues and negotiations. This representation need not come in the form of a bureaucratic office that threatens the state insurance regulatory system, however. Instead, insurance experts can be hired by the U.S. Trade Representative and in the international affairs department of the U.S. Treasury to conduct international negotiations and confer as appropriate with domestic insurance regulatory representatives. PIA National is not opposed to the execution of these duties, just the execution by a federal office that will continue to grow in power and size.
Expanding the FIO
In the 115th Congress, the Financial Choice Act passed the House, but it did not become law. Even so, the bill’s evolution was instructive in its demonstration that proponents of the FIO seek to increase its power at any available opportunity. The Financial Choice Act is an example of why the FIO’s continued existence is a dangerous threat to the state insurance regulatory system. The bill included a disturbing provision that sought to supersize the power of the FIO by merging it with the independent member with insurance expertise on the FSOC to create a new bureaucracy to be known as the Office of the Independent Insurance Advocate. The new office would have included all the FIO’s current duties and strengthened it by awarding it additional mandates.
The proposed independent insurance advocate would have been given such power and resources that would have made it a veritable insurance czar: a six-year, Senate-confirmed term; an office budget separate from that of the U.S. Treasury; permission for the independent insurance advocate to hire employees such as “attorneys, analysts, economists, and other employees as may be deemed necessary …”; an explicit prohibition on the Secretary of the Treasury taking action to “delay or prevent the issuance of any rule or the promulgation of any regulation by the Independent Insurance Advocate,” and a prohibition on the Treasury Secretary intervening “in any matter or proceeding before the Independent Insurance Advocate, unless otherwise specifically provided by law.” The last two prohibitions would have rendered this new leader effectively accountable to no one.
The power and scope of this proposed office would have forever cemented the federal government’s role in historically state-regulated insurance issues. The fact that such a broad expansion of a federal role in insurance was included in a bill meant to roll back many provisions of Dodd Frank proves that the forces actively attempting to engineer a federal takeover of insurance regulation are not benign and will aggressively persist in their efforts.
Taking on the Federal Insurance Office
Thankfully, Congressman Alex Mooney (R-WV) and Senator Ted Cruz (R-TX) are leaders who have stood up in defense of the state insurance regulatory system. Congressman Mooney earlier this year reintroduced legislation to repeal the FIO, the Federal Insurance Office Abolishment Act (H.R. 1862), which PIA National supports. Senator Ted Cruz introduced a companion bill (S. 1586) in the Senate in late May.
PIA National also welcomes support from other insurance trade associations in championing this worthy legislation. Rep. Mooney and Senator Cruz deserve industry support for their effort, and members of every insurance association should ask their leaders to explicitly endorse state insurance regulation with a letter supporting the bill.
Jon Gentile (email@example.com) is vice president of Government Relations of the National Association of Professional Insurance Agents (PIA National) based in Alexandria, Va.