By STEVE TUCKEY, who has written on insurance issues for a decade for several national media
Six months into his new role as the first director of the Federal Insurance Office, Michael McRaith described walking a fine line between actually monitoring state-based insurance regulation and remaining a passive observer to the process.
Speaking at the Joint Industry Forum in New York on Jan. 10, McRaith pledged a hands-off attitude toward the day-to-day regulatory activities of states, but said that did not mean "just sitting idly by while the world spins round."
U.S. Treasury Secretary Timothy Geithner named the former director of the Illinois Insurance Department to the federal post last summer after a decade of division within the industry over the merits of state versus federal regulation.
The Federal Insurance Office was incorporated into the Dodd-Frank Wall Street Reform and Consumer Protection Act passed in 2010 to serve primarily as the focal point for negotiations with insurance regulators throughout the world.
But in the question-and-answer session, an event participant asked McRaith about his vow to study the issue of access to markets typically underserved by the insurance industry -- and got a curt response from the director.
McRaith said that the issue of underserved communities would be addressed in a report planned for release sometime this month, which could provide a further blueprint for the role the Federal Insurance Office will play in the coming years. "But that was an excellent question," he said, somewhat tongue-in-cheek.
Among the director's responsibilities will be negotiating with his European counterparts to develop regulatory standards that can be deemed equivalent across borders, a process McRaith admits has raised wariness in this country.
"What we need are clarity and finality in all of these discussions," he said of the Solvency II negotiations now under way.
But the increasing dependence of insurance conglomerates on markets outside their nation's borders dictates the need for more global regulatory standardization, he said.
During the long, drawn-out negotiations that led to the passage of Dodd-Frank, the insurance industry fought to be free from the dreaded "too big to fail" designation. Both McRaith and Missouri Insurance Commissioner John Huff will serve on the Financial Stability Oversight Council and be in position to present the industry's viewpoint on that matter.
In addition, the industry also gained exemption from the purview of the Consumer Financial Protection Board. But that does not mean that all fears have been quelled on that possible role.
David Long, chief executive officer of Liberty Mutual, said at the forum that while at first he was concerned that the Federal Insurance Office would "become some sort of consumer protection bureau," he feels McRaith is on the right track in maintaining his focus on foreign negotiations. "We don't think our customers need protection," he said.
McRaith pledged that he would first look to publicly available sources for data from state insurance departments before making any requests from insurance companies. He also said he would use the Federal Insurance Office's subpoena power only "as a last resort" when companies refuse requests.
January 11, 2012
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