It’s tough to be the new kid on the block as the Federal Insurance Office (FIO) is quickly finding out. FIO Director Michael McRaith had an idea and it wasn’t like the idea was bizarre or anything. Simply put – there appears to be a question, if not a problem, with life insurers using special purpose vehicles and captives to offload insurance reserves. The Federal Advisory Committee on Insurance should set up a task force to investigate. This is important enough that the U.S. Treasury Department needs to be “fully informed.”
The more established kids on the block were not so keen on the idea. Connecticut Insurance Commissioner Tom Leonardi had some advice for FIO: “There is no need – the National Association of Insurance Commissioners (NAIC) and states are already doing it.” NAIC CEO Ben Nelson also offered some advice (albeit just a bit more direct). In a speech to the National Conference of Insurance Legislators, he warned of “mission creep” and said that FIO should stay in its own lane.
Now let’s be clear. No one is questioning the importance of the subject matter. In reality, the subject matter could be about almost anything else and the reaction likely would be the same. The issue is that like any new kid on the block, FIO is still trying to figure out its place in the neighborhood and the neighborhood is trying to figure out the new kid.
For many years, the kids on the block have been the 56 insurance jurisdictions and the NAIC. Dodd-Frank changed that with FIO’s creation and this conflict was almost inevitable (especially considering that the states and the NAIC were not especially excited about FIO to begin with). But FIO is here and it appears to be here to stay. Even though FIO is not a regulator, its mandate is to be fully informed on insurance regulatory issues. As with anything new, it takes a bit of time to figure out the new relationships and the dynamics associated with those relationships.
It’s just part of having a new kid on the block.