Agents: Defund Federal Study of Insurance Regulation

A producers association called for Congress to weaken the new Federal Insurance Office by stripping funding for a scheduled study of insurance regulation.

The National Association of Professional Insurance Agents also wants Congress to pass legislation repealing the FIO's assigned role to recommend changes in insurance regulation based on the results of that review. The organization's main concern is that the FIO -- established as part of the Dodd-Frank financial reform act -- sticks to a finely limited role in gathering information and doesn't become "ground zero for a burgeoning movement for federal insurance regulation," spokesman Ted Beseparis said.

"We want to make sure it doesn't stray from the original intent of Congress," he said.

The office lacks the authority to act as a federal regulator. Under Dodd-Frank, it is tasked with developing a report on the state of insurance regulation for delivery early next year. Supporters of the state-based system are wary of potential implications of legislative language to evaluate conditions in "traditionally under-served communities and consumers" and to evaluate the ability of the federal government to "eliminate or minimize regulatory arbitrage" (BestWire, Dec. 8, 2010). More than six months after passage, the FIO still lacks a leader.

In conducting the study, the FIO has an inherent conflict of interest, PIA National Executive Vice President and Chief Executive Leonard C. Brevik said.

"Federal bureaucrats should not be conducting a study on whether or not their own powers should be expanded, and then making recommendations to Congress based on a study that they alone conducted," he said in a statement. "It assures a biased result because it asks federal regulators if they believe in federal regulation. Of course their answer will be 'yes.' Congress needs to defund this Trojan horse for federal expansion and encroachment."

The FIO's responsibilities include issuing recommendations to the new Financial Stability Oversight Council, coordinating federal efforts and develop federal policy on prudential aspects of international insurance matters and determining whether state laws are pre-empted by those covered agreements and administering the federal terrorism risk insurance program.

In November, Deputy Treasury Secretary Neal Wolin said the FIO will allow the federal government to "increase international cooperation on insurance regulation, enhancing our collective efforts in addressing risks posed to the financial system" in a speech at the London Stock Exchange (BestWire, Nov. 22, 2010).

PIA stopped short of calling for defunding the FIO in its entirety. Rep. Michele Bachmann, R-Minn., has introduced H.R. 87 to repeal all of Dodd-Frank.

"Dodd-Frank grossly expanded the federal government beyond its jurisdictional boundaries. It gave Washington bureaucrats the power to interpret and enforce the legislation with little oversight," she said in a statement.

(By Sean P. Carr, Washington Bureau Manager: [email protected])