On December 12, 2013, the Federal Insurance Office (FIO) submitted to Congress and released a report entitled, “How to Modernize and Improve the System of Insurance Regulation in the United States.” The report was mandated by Title V of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In its preparation of the report, FIO reviewed nearly 150 written comments and consulted with nearly 40 different insurance sector participants and stakeholders, including insurance regulators, insurance companies and consumer advocates.
In its report, FIO recognizes the importance of the state-based system of insurance regulation, but also notes that “[a]ny system with 56 independent jurisdictions is inherently limited in its ability to regulate uniformly and efficiently.” The report therefore takes a two-pronged approach: specifying reforms FIO believes are needed in the state-based system of insurance regulation and also identifying new areas for direct federal involvement.
FIO’s recommendations for state based reforms focus on three areas: (1) capital adequacy and safety/soundness; (2) reform of insurer resolution practices and (3) marketplace regulation.
The FIO report also identifies areas for direct federal involvement, which include, among other topics: (1) development and implementation of federal standards and oversight for mortgage insurers, (2) uniform reinsurance collateral requirements based on the NAIC models, (3) a national registration system for insurance agents and brokers and (4) FIO participation in supervisory colleges that will oversee large national and internationally active insurers.
A complete list of the FIO recommendations for modernizing and improving insurance regulation in the United States is found under Section I of the report.
In its report, FIO states that it intends to work with all aspects of the insurance sector and promises to “recommend additional improvements to the U.S. system of insurance regulation that best integrate the interests of U.S. insurers and consumers.”
We are still analyzing the 71-page report and will provide further analysis in the near future. In the meantime, if you have any questions about the FIO report, please contact James R. Woods at +1 212 506 2390, David W. Alberts at +1 212 506 2611, Lawrence R. Hamilton at +1 312 701 7055, or your usual Mayer Brown contact.