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Federal vs. State Regulation of Insurance — FIO Hearing 6-13-2013

June 17, 2013

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The Director of the Federal Insurance Office (FIO), Michael McRaith, spoke before the House Financial Services Committee’s Insurance and Housing Subcommittee on Thursday, once again asserting that the FIO’s long-awaited report on insurance regulatory modernization would be issued “soon.” McRaith said that he hoped to have it completed this summer. Just the day before, on June 12th, the FIO released its first annual report to Congress, required as part of the Dodd-Frank Act, to report on the state of the U.S. insurance industry. The report included an industry financial overview, legal and regulatory developments, and current issues and emerging trends.

At Thursday’s hearing, McRaith addressed insurers’ concerns that the industry may be moving toward international insurance regulations. Insurers worry that these types of regulations could put U.S. insurers at a competitive disadvantage. A letter from trade groups, including the American Insurance Associations, the Property Casualty Insurers Association of America, the National Association of Mutual Insurance Companies, and the Financial Services Roundtable, urge law makers to “ensure a level playing field through a focus on outcomes, not the imposition of additional layers of new standards.” It also pointed out that the current system has worked effectively during the recent economic crisis, therefore making “bank-centric” regulations unwarranted.

During the hearing, Rep. Ed Royce (R-CA) expressed concern for the lack of uniformity among state regulations, a concern that has been repeatedly brought up over the years. Some believe that inconsistency in regulations from one state to another puts an undue burden on nationwide insurers, who have to work with 50+ individual jurisdictions. However, others argue that federal regulations would be unable to deal with the unique concerns that vary from state to state. The U.S.’s thriving insurance industry may serve as proof that the current state regulatory system is working to effectively serve the needs of the public.

Article by: April LaRita Green

Sources: Annual Reports on the Insurance Industry. Federal Insurance Office, U.S. Department of Treasury: 2013

FIO Director McRaith Clarifies IAIS Role, Reiterates Priority to U.S. Insurers. Property Casualty 360

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