National Dec 12, 2013

FIO report released at last, PIA comments

Yesterday, the U.S. Treasurys Federal Insurance Office issued its modernization report, which found that the debate shouldnt be whether or not insurance regulations should be state- or federal-based, but rather if there are certain areas in the state-based system that should be regulated on a federal level. More

According to a statement issued by PIA:

We are disappointed that the FIO, in its narrative regarding the 2007-09 financial crisis, does not appear to take into account the report issued by the Government Accountability Office on June 27, 2013. The FIO report sails by the GAO conclusion that the state insurance regulatory system worked well to help mitigate the negative effects of the crisis on the insurance industry.

The FIO report, in attempting to make a case for more uniform regulation, cites only one recent example to make its case: AIG. However, we believe it significantly misreads and misinterprets what actually happened. It also appears to give a pass to the regulatory failures admitted by the Office of Thrift Supervision involving the non-insurance unit of AIG, which generated the initial problems.

"It looks like the FIO, reading the political climate, decided not to propose a full federal takeover of insurance regulation from the states, but to take steps to frame a future debate," said PIA National Executive Vice President & CEO Mike Becker. "On first blush, this looks like the camels nose under the tent.

"As a strong supporter of our successful state-based system of insurance regulation, PIA is concerned that the FIO report may be driven by assumptions and assertions that do not hold up to scrutiny," Becker said. "Many of FIOs assumptions appear to have been contradicted by a Government Accountability Office report that concluded that the state insurance regulatory system worked well to help mitigate the negative effects of the 2007-09 financial crisis on the insurance industry. We look forward to providing our more detailed, substantive analysis in the days and weeks ahead."