The National Association of Mutual Insurance Companies is calling for legislative action to abolish the Federal Insurance Office, a relatively new part of the U.S. Treasury Department.
NAMIC is the first insurance-related group to formally call for the elimination of the FIO, though the National Association of Insurance Commissioners has voted on a motion making a push to eliminate the office part of its agenda.
Some insurance trade groups have been supportive of the FIO, or at least some of its work, including the bilateral agreement, or covered agreement, recently forged with the European Union on reinsurance collateral and leveling the playing field in the EU under Solvency II. The American Council of Life Insurers and the Reinsurance Association of America, for instance, welcomed the covered agreement announcement. Industry sources representing larger, multinational companies said the agreement preserves NAIC policy positions and criteria on a number of matters.
But others, especially NAMIC, are striking a different posture.
"After working with the FIO for several years, we have ultimately concluded that the office is unnecessary and has added little of value to the U.S. insurance system, policyholders, or taxpayers," Jimi Grande, senior vice president of federal and political affairs for NAMIC, said in a statement.
In a background brief, NAMIC criticized the FIO for allegedly trying to attain more power and authority beyond its role as described in the Dodd-Frank Act. NAMIC particularly targeted the office for duplicating state insurance regulators' existing data collection efforts, for producing reports that it saw as intrustive and for rushing into a "bad deal" in the form of the covered agreement with the EU.
NAMIC's brief called the covered agreement, which began a 90-day layover in Congress on Jan. 13, "an invented solution to an invented problem — the question of European regulators deeming the U.S. regulatory system equivalent." The trade organization claimed that the arrangement "does more harm than good" and said it opens the door for Europe to "continue to impose its regulatory standards on U.S. state-regulated insurance markets."
The Terrorism Risk Insurance Act program, currently handled by the FIO, could go back to another part of Treasury that previously ran it for a decade, NAMIC suggested. NAMIC's brief also took issue with the content and scope of statutorily mandated reports on affordability and consumer protections.
In some instances, the FIO "is actively damaging to the conversation in Washington, as in the case of its recently released report on consumer protections," Grande stated. Grande lashed the consumer protections report as "a grab bag of controversial political opinions" that "contributed virtually nothing to anyone's understanding of insurance in the U.S."
Although not happy with follow-through by the FIO on its engagement or participation with state legislators, the head of the National Conference of Insurance Legislators said he thinks it would be shortsighted to abolish the FIO when it could become a powerful proponent of state regulation of insurance under the Trump administration. A new FIO director, or a person holding a reconfigured federal insurance position, "could become a very strong advocate of state insurance authority and regulation," NCOIL CEO Tom Considine said in an interview.
A spokesperson for Treasury Secretary nominee Steven Mnuchin did not return a request for comment about any potential restructuring of the FIO.