NAIC President: State Regulators Shut Out Of FSOC Participation

NU Online News Service, March 2, 2:10 p.m. EST

Susan Voss, president of the National Association of Insurance Commissioners and Iowa's insurance commissioner, has raised objections about the treatment the insurance industry is receiving from the members and staff of the Financial Stability Oversight Council.

Ms. Voss also criticized Treasury Secretary Timothy Geithner and the FSOC staff's interpretation of the limited role being carved out by the FSOC for Missouri Insurance Commissioner John Huff, the non-voting insurance representative on the FSOC.

The concerns deal with the fact that Mr. Huff is not being allowed to brief other insurance commissioners and the NAIC staff on FSOC activities under a confidentiality mandate.

Ms. Voss outlined her criticisms in a Feb. 9 letter sent to Mr. Geithner, as well as in a memo the NAIC sent to NU Online News Service when asked about the issue.

Ms. Voss also spoke at a conference in New York on modernized insurance regulation, sponsored by the American Conference Institution.

The NAIC staff did not make her remarks from the New York meeting available, but comments were obtained independently by NU Online News Service from several conference attendees. According to those sources, Ms. Voss compared the treatment of the insurance industry to the Thanksgiving feast where children are kept at a separate table.

In the Feb. 9 letter, Ms. Voss and other commissioners wrote, "To date, the [Treasury] Department, either independently or in concert with other FSOC member agencies, has limited [state regulators'] ability to meaningfully participate in FSOC's work and provide the regulatory perspective of the insurance sector to these critical discussions."

The letter adds, "The state insurance regulatory system could easily be accommodated to more fully participate in the FSOC but, to date, we have been met with opposition to expanding our contributions to even a fraction of that contributed by federal agencies."

As for Mr. Huff, he is apparently being barred by the FSOC staff to discuss FSOC business with either the NAIC or individual state commissioners.

The letter states, "Since he began his participation on the FSOC, Director Huff has repeatedly requested the [FSOC] to allow him to tap the NAIC and the state insurance departments for additional staff support in relevant issue areas, but these requests have met with resistance and delay and Director Huff has been prohibited from discussing or seeking guidance from relevant state regulators even on a confidential basis."

She noted that a state securities regulator and a state banking regulator also serve as non-voting members of the FSOC and are covered by the confidentiality agreement, but their situation is not as acute because there are federal securities and banking regulators able to provide input. Insurance has no such federal presence, as it is state regulated.

Ms. Voss said any issue of confidentiality can be addressed. The letter states, "Any additional NAIC staff members or state regulators enlisted to support Director Huff would sign appropriate confidentiality agreements that impose the same confidentiality restrictions as the three staff members who presently support him. Under such circumstances, increasing the number of state regulator and NAIC staff supporting the work of FSOC would not create any additional confidentiality risk but would undoubtedly provide the FSOC with desperately needed state insurance regulatory expertise."