The NAIC officers have also asked congressional leaders to get state insurance regulators voting seats on the Financial Stability Oversight Council. (Credit: Vladimir Sviracevic/Shutterstock)
State insurance regulators want Congress to get the U.S. Treasury Department out of their business.
The officers of the National Association of Insurance Commissioners have written to congressional leaders to ask them to eliminate the U.S. Treasury Department's Federal Insurance Office.
The NAIC officers have also asked congressional leaders to get state insurance regulators voting seats on the Financial Stability Oversight Council.
Congress has a critical role to play in areas such as helping provide financial support for state insurance efforts to fight financial fraud against older consumers, but, "at the same time, we are deeply concerned about any federal efforts to preempt state authority in areas critical to consumer protection and market stability," the NAIC officers write in their letter.
Giving state insurance regulators voting seats at FSOC could give the council a deeper understanding of insurance sector trends, and eliminating FIO could reduce conflicts between the FIO and insurers' primary regulators, the NAIC officers say.
The officers included the requests in a letter summarizing state insurance regulators' priorities for insurance markets this year.
The NAIC is meeting this week in Indianapolis.
What it means: The next few months could lead to big changes in federal insurance oversight efforts.
For life and annuity advisors, the matter could eventually have an effect on the rules for products that tend to be backed by big, complicated investment portfolios, such as life insurance and disability insurance. Changes in federal regulators' approach to systemic risk could make the products simpler or more difficult to offer.
The backdrop: The United States leaves insurance regulation to the states. The NAIC helps state insurance regulators share ideas and resources, such as the services of teams of securities valuation specialists.
Congress created the Federal Insurance Office and the Financial Stability Oversight Council in response to the 2007-2009 financial crisis, based on the view that federal financial regulators were obsessed with banks and securities dealers and knew too little about the rest of the financial system.
The FIO helps Treasury officials monitor insurance trends. It also represents the U.S. insurance industry in international insurance negotiations.
FSOC, a body that has the Treasury secretary as its chair, coordinates U.S. financial regulator efforts to track and respond to threats to the stability of the financial system.
One of FSOC's 10 voting members is supposed to be an "independent member with insurance expertise." One of the five non-voting FSOC members is a state insurance regulator, and another is the FIO director.
The letter: The officials who signed the NAIC's letter to congressional leaders included Jon Godfread, the North Dakota insurance commissioner, who's now serving as the NAIC's president. The other officials who signed the letter are Scott White, the NAIC's president-elect and the Virginia insurance commissioner; Elizabeth Kelleher Dwyer, the NAIC's vice president and Rhode Island's insurance director; and Jon Pike, the NAIC's secretary-treasurer and the Utah insurance commissioner.
The recipients were Senate Majority Leader John Thune; Senate Minority Leader Chuck Schumer; House Speaker Mike Johnson; and House Minority Leader Hakeem Jeffries.
The Federal Insurance Office: The NAIC officers say they reached the conclusion that the FIO "stands in direct conflict with the states' role as primary regulators."
The FIO "complicates the state's engagement with fellow insurance regulators globally, duplicates confidential data collection from our industry, and blurs the lines that separate Treasury from the financial regulators," the NAIC officers write.
The officers say Treasury should continue to have insurance expertise on its staff.
But it shouldn't be involved in activities that "can cause public confusion on the status of the markets we regulate as well as with other insurance regulators globally," the officers write.
The Financial Stability Oversight Council: The NAIC officers say the lack of voting insurance regulators on FSOC "devalues the authority and expertise that state insurance regulators bring to discussions about the stability of the insurance market."
Insurance is the only sector with a primary regulator that lacks a voting FSOC seat, the officers write.
"State commissioners possess unparalleled insight into the financial health of the sector, and importantly, have the authority to respond to any issues or concerns identified by FSOC, so their inclusion as voting members of FSOC would enhance the council's ability to assess and mitigate systemic risks that could have far-reaching implications for the broader financial system," the officers say.
This piece was originally published on ThinkAdvisor.com and may not be reprinted.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.