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FIO's McRaith Affirms States as Functional Regulators of Insurance

Michael McRaith, the director of the Federal Insurance Office, affirmed during testimony to Congress that the states are the functional regulators of the business of insurance and that the FIO “is not a regulator”
October 26, 2011

Michael McRaith, the director of the Federal Insurance Office, affirmed during testimony to Congress that the states are the functional regulators of the business of insurance and that the FIO “is not a regulator.”

While Federal Insurance Office (FIO) Director Michael McGraith was careful to note during his October 25 testimony before the House Financial Services Committee’s Subcommittee on Insurance, Housing and Community Opportunity that the FIO is not a regulator, he said an FIO study of how to improve the state system of insurance regulation will deal with the areas outlined by Congress when it mandated the study.

Rep. Steve Stivers (R-Ohio) asked McRaith if he can assure that the study the FIO is conducting will not be biased in a way that leads the FIO to recommend greater federal regulation of insurance. McRaith did not answer directly, instead pointing to the provision of the Dodd-Frank law that mandated the study and saying, “the bias is framed by the statute.” At another point in the hearing, in reference to the FIO’s mandate to monitor the insurance industry, McRaith added, “we are working to define the word ‘monitor.’”

Asked by Rep. Brad Sherman (D-Calif.) if the study by the FIO will be a rehash of previous Treasury Department studies, McRaith said it “will not be a recycling of previous studies; having said that, there may be principles [from] a previous report, we may echo some of those principles.” Pressed if that meant the FIO report will be 100 percent new, McRaith declined to say it would, but indicated it would not be a rehash of previous Treasury reports.

Early in the hearing, Chairman Judy Biggert (R-Ill.) asked McRaith to repeat what he stated in his prepared remarks, that the FIO is not a regulator, and he did. But later, during an exchange about the activities of the FIO, he stated that “the range and depth of our portfolio is still being defined.” PIA believes that portfolio has already been defined in the Dodd-Frank bill, which established clear parameters on the FIO’s activities.

What It Means to Agents: PIA National will file formal comments as requested by the FIO in its October 17 notice in the Federal Register. We are grateful to Rep. Stivers and Rep. Sherman for raising some of the concerns that PIA has regarding the ability of the FIO to be unbiased in its study.