Mr. McRaith Heads to Washington
By DAN REYNOLDS, senior editor of Risk & Insurance®
The creation of a Federal Insurance Office may yet prove to have some upsides, but like many a governmental creation, it's not necessarily the pure concept that is worrisome. Rather, it's the tendency of government departments and programs to grow too big for their britches.
Nevertheless, the news that Michael McRaith, the insurance commissioner of the state of Illinois, was chosen by Treasury Secretary Tim Geithner to be the first director of that office was well-received by the insurance industry and by those who have had a chance to work with him.
McRaith is the secretary-treasurer of the National Association of Insurance Commissioners. He has worked closely with NAIC vice president and Louisiana Insurance Commissioner Jim Donelon.
Donelon didn't need much time to identify what he feels is the primary weapon in McRaith's arsenal.
"No question about it, it's his intellect," said Donelon. "He is extremely bright and is a very talented, trained lawyer who can decipher details and articulate them very well."
Robert Hartwig, the president of the New York-based Insurance Information Institute, said that the industry's reception of McRaith as the first director of the Federal Insurance Office has been generally positive.
"Clearly, he is a competent director of the Illinois Insurance Department," Hartwig said. "He has had leadership roles at the NAIC and knows insurance markets well, and I think every insurer and every insurance trade association is looking to start out this relationship on a positive note."
McRaith's office declined a request for a telephone interview but issued this statement from McRaith:
"I am honored to be appointed by Secretary Geithner to be director of the Federal Insurance Office. I look forward to the challenges of that office when that work begins. In the meantime, I'm focused on my duties as director of insurance in Illinois, serving in Governor Quinn's administration and doing my best on behalf of the people of Illinois."
It's not until June that McRaith takes over the federal office. When he begins that task, he will have an opportunity that no one else in that office will ever have. As the office's first director, he has the opportunity to set the tone for the office and help in a substantial way to determine what it will become.
According to Hartwig, there is much good that such an office can do. "One of the upsides in the original motivation was to have some in-house awareness and understanding of the insurance industry within the Treasury Department," Hartwig said.
Hartwig reflected on the financial meltdown of late 2008, the near disintegration of AIG and the fact that there was "literally nobody to turn to in the Treasury Department or in the Federal Reserve who had any significant expertise in this matter."
"I think there is a role for the federal insurance office," Donelon agreed. "It allows the policymakers on a national level to have one place to go to for knowledge and resources and expertise, and in particular when that office is headed up by someone who is as familiar with our system as he is."
"I just hope it's not grown into an alternative replacement for something that has served us very, very well for a very, very long time," Donelon said.
Hartwig also expressed his concerns about what the Federal Insurance Office might become.
"I think there are concerns that ultimately the FIO could wind up, not necessarily under McRaith's watch, but become a shadow federal regulator and wind up suffering from mission creep over time," Hartwig said.
March 29, 2011
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