With only a few key differences to overcome, the House and Senate have hammered out several points regarding the creation of an office to monitor the insurance industry as part of the currently debated financial industry reform bill.  According to media sources:  (i) the office will be located in the United States Department of the Treasury; (ii) it will be called the Federal Insurance Office (the “FIO”); (iii) it will work closely with the U.S. Trade Representative to secure international insurance agreements regarding prudential matters; (iv) it will be required to consult with relevant congressional committees regarding those international agreements; and (v) it will have the authority to collect market information from insurers – but only after first determining if it can get that information from other sources.

Still to be determined are whether de novo judicial review of decisions by the FIO should be granted and the amount of authority the FIO should have in preempting state law when becoming signatories to international insurance agreements.  With de novo judicial review, the federal court would not grant the FIO the deference typically accorded to an administrative agency and require automatic judicial review of FIO state-law preemption decisions.  Proponents of de novo judicial review believe that it will provide the necessary safeguards for maintaining the current state-based insurance regulatory system.  Opponents believe that it could hinder the FIO’s decision-making capabilities.

Systemic Risk Council

The National Association of Insurance Commissioner (the “NAIC”) scored a win in the latest debate regarding the Financial Stability Oversight Council (the “FSOC”).  Media sources have reported that House and Senate negotiators have agreed that a state insurance commissioner will have a nonvoting seat on the FSOC.  This is in accordance with a letter the NAIC sent to congressional leaders earlier this month.

Opposing inclusion of an insurance industry representative on the FSOC is the National Association of Mutual Insurance Companies (the “NAMIC”), which believes that since the insurance industry is not systemically risky, the insurance industry should avoid any association with systemic risk regulation.  According to Matt Brady, NAMIC spokesperson, inclusion on the FSOC, “creates sort of the implicit mandate to find a reason to sort of bring an insurance company into that.  At some point, somebody’s going to have to ask why they are there.”