[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
INSURANCE OVERSIGHT: POLICY
IMPLICATIONS FOR U.S. CONSUMERS,
BUSINESSES, AND JOBS, PART 2
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
INSURANCE, HOUSING AND
COMMUNITY OPPORTUNITY
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
OCTOBER 25, 2011
__________
Printed for the use of the Committee on Financial Services
Serial No. 112-77
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HOUSE COMMITTEE ON FINANCIAL SERVICES
SPENCER BACHUS, Alabama, Chairman
JEB HENSARLING, Texas, Vice BARNEY FRANK, Massachusetts,
Chairman Ranking Member
PETER T. KING, New York MAXINE WATERS, California
EDWARD R. ROYCE, California CAROLYN B. MALONEY, New York
FRANK D. LUCAS, Oklahoma LUIS V. GUTIERREZ, Illinois
RON PAUL, Texas NYDIA M. VELAZQUEZ, New York
DONALD A. MANZULLO, Illinois MELVIN L. WATT, North Carolina
WALTER B. JONES, North Carolina GARY L. ACKERMAN, New York
JUDY BIGGERT, Illinois BRAD SHERMAN, California
GARY G. MILLER, California GREGORY W. MEEKS, New York
SHELLEY MOORE CAPITO, West Virginia MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina CAROLYN McCARTHY, New York
JOHN CAMPBELL, California JOE BACA, California
MICHELE BACHMANN, Minnesota STEPHEN F. LYNCH, Massachusetts
THADDEUS G. McCOTTER, Michigan BRAD MILLER, North Carolina
KEVIN McCARTHY, California DAVID SCOTT, Georgia
STEVAN PEARCE, New Mexico AL GREEN, Texas
BILL POSEY, Florida EMANUEL CLEAVER, Missouri
MICHAEL G. FITZPATRICK, GWEN MOORE, Wisconsin
Pennsylvania KEITH ELLISON, Minnesota
LYNN A. WESTMORELAND, Georgia ED PERLMUTTER, Colorado
BLAINE LUETKEMEYER, Missouri JOE DONNELLY, Indiana
BILL HUIZENGA, Michigan ANDRE CARSON, Indiana
SEAN P. DUFFY, Wisconsin JAMES A. HIMES, Connecticut
NAN A. S. HAYWORTH, New York GARY C. PETERS, Michigan
JAMES B. RENACCI, Ohio JOHN C. CARNEY, Jr., Delaware
ROBERT HURT, Virginia
ROBERT J. DOLD, Illinois
DAVID SCHWEIKERT, Arizona
MICHAEL G. GRIMM, New York
FRANCISCO ``QUICO'' CANSECO, Texas
STEVE STIVERS, Ohio
STEPHEN LEE FINCHER, Tennessee
Larry C. Lavender, Chief of Staff
Subcommittee on Insurance, Housing and Community Opportunity
JUDY BIGGERT, Illinois, Chairman
ROBERT HURT, Virginia, Vice LUIS V. GUTIERREZ, Illinois,
Chairman Ranking Member
GARY G. MILLER, California MAXINE WATERS, California
SHELLEY MOORE CAPITO, West Virginia NYDIA M. VELAZQUEZ, New York
SCOTT GARRETT, New Jersey EMANUEL CLEAVER, Missouri
PATRICK T. McHENRY, North Carolina WM. LACY CLAY, Missouri
LYNN A. WESTMORELAND, Georgia MELVIN L. WATT, North Carolina
SEAN P. DUFFY, Wisconsin BRAD SHERMAN, California
ROBERT J. DOLD, Illinois MICHAEL E. CAPUANO, Massachusetts
STEVE STIVERS, Ohio
C O N T E N T S
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Page
Hearing held on:
October 25, 2011............................................. 1
Appendix:
October 25, 2011............................................. 23
WITNESSES
Tuesday, October 25, 2011
McRaith, Hon. Michael T., Director, Federal Insurance Office,
U.S. Department of the Treasury................................ 5
APPENDIX
Prepared statements:
McRaith, Hon. Michael T...................................... 24
INSURANCE OVERSIGHT: POLICY
IMPLICATIONS FOR U.S. CONSUMERS,
BUSINESSES, AND JOBS, PART 2
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Tuesday, October 25, 2011
U.S. House of Representatives,
Subcommittee on Insurance, Housing
and Community Opportunity,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:02 p.m., in
room 2128, Rayburn House Office Building, Hon. Judy Biggert
[chairwoman of the subcommittee] presiding.
Members present: Representatives Biggert, Hurt,
Westmoreland, Duffy, Dold, Stivers; Gutierrez, Velazquez,
Cleaver, Sherman, and Capuano.
Also present: Representatives Royce and Green.
Chairwoman Biggert. This hearing of the Subcommittee on
Insurance, Housing and Community Opportunity will come to
order, and we will begin with opening statements. I recognize
myself for 4 minutes.
Good afternoon and welcome to this hearing, the second in a
series, entitled, ``Insurance Oversight: Policy Implications
for U.S. Consumers, Businesses, and Jobs.''
I welcome today's witness, Mr. Michael McRaith, Director of
the Federal Insurance Office at the Department of the Treasury.
In his new capacity--this is the Director's first appearance
before any congressional committee, and we are so happy that he
is here. He served as the Director of the Illinois Department
of Insurance and as part of the National Association of
Insurance Commissioners leadership team. We look forward to the
Director describing his initial activities and future plans to
carry out his duties as authorized by the Dodd-Frank Act.
The new Federal Insurance Office, also called FIO, has an
important but limited role, and this hearing will give us an
opportunity to discuss ways to keep the U.S. insurance market
free of any unnecessary regulatory burden and internationally
competitive.
In addition, much like our first insurance oversight
hearing in July, we will continue to examine how provisions in
the Dodd-Frank and other recent domestic and international
initiatives affect the insurance industry. For over 150 years,
the State-based system of insurance regulation has worked and
endured, even during turbulent economic times, allowing the
U.S. insurance industry to become a growing and vibrant source
of financial security for millions of Americans. That financial
security includes providing 2.3 million wage and salaried jobs.
Congress occasionally reviews the State-based system to
ensure uniformity and effectiveness. The McCarran-Ferguson Act
of 1945 maintained the States' regulatory authority over
insurance unless a Federal law expressly provides otherwise,
such as flood and terrorism insurance. However, for U.S.
insurers, the Dodd-Frank Act unnecessarily upset this well-
functioning and proven system of regulation.
In July, we heard from a spectrum of witnesses that the
Dodd-Frank Act as well as international regulatory initiatives
have created great uncertainty for U.S. companies that are in
the business of insurance. Our U.S. insurers are holding their
breath in anticipation of being subject to new regulations
issued by Federal bank regulators, higher capital standards,
restrictions on investment, payments to a new Federal bailout
fund, and to what end? As a result, insurers have told me that
they are not expanding their companies and creating jobs,
consumer costs may rise, and they may become less competitive
abroad. These are very serious and real results of uncertainty
created by Washington.
I hope that today's hearing can shed light on how the FIO
can help provide guidance to regulators and much-needed clarity
to our U.S. insurers. It is my hope that today's hearing also
will reveal how the FIO Director will use his office to help
our insurers remain internationally competitive.
With that, I yield to the ranking member, Mr. Gutierrez
from Illinois, for his opening statement.
Mr. Gutierrez. Thank you so much.
Thank you, Madam Chairwoman, and thank you, Director
McRaith, for joining us this afternoon to provide an update on
the important work that you have started at the Federal
Insurance Office, or FIO.
When the subcommittee met in July to discuss the Federal
Government's role in insurance policy, almost every witness
conveyed one clear message, that you were going to be very
important, vitally important. Even though our State regulators
and legislators have been very effective, there is a gap at the
Federal level in our understanding of the insurance industry
and our ability to coordinate domestic and international
insurance policy. The FIO attempts to fix this by working with
State officials to improve the regulatory environment, protect
U.S. interests internationally, and prevent systemic risks and
failures related to the insurance industry.
Some of my Republican colleagues have characterized the FIO
as a regulatory threat and have attacked it just like they have
attacked the Consumer Financial Protection Bureau. They have
these ``Chicken Little'' theories, constantly warning us that
the regulatory sky is going to fall on us if we let the FIO
move forward.
I want to remind my colleagues that we were very careful to
define the FIO in such a way that limits any negative impact on
the industry and keeps it focused on necessary interstate
coordination, data gathering, and monitoring. I understand that
my colleagues on the other side of the aisle are particularly
concerned with the role FIO plays on the Financial Stability
Oversight Council, or FSOC, and the Director's ability to
recommend the FSOC consider a potentially risky insurance
company for higher prudential standards. This policy
acknowledges that not all insurance companies have the same
business model, and that the AIGs of the world are
interconnected, even that their failure would have a serious
impact on financial markets. As I understand it, the FSOC is
developing strict criteria for this designation, which I find
appropriate.
Unfortunately, some seem to agree with the insurance
industry and say that any regulation is just no regulation to
many. How high do we expect to set the bar in order for an
insurance company to be considered risky so that we can have
additional oversight to keep it from bringing down our entire
economy? No matter where we end on this question, some will say
we set the bar too high, others will say we set it too low.
And, fortunately, the FIO and Director McRaith will provide
specific insurance expertise to help State and Federal
regulators reach an effective, workable standard.
I look forward to hearing about how the FIO is starting to
fulfill its mission to make insurance regulation in this
country better and more efficient, not more cumbersome. In
that, I agree with the Majority. I think this hearing will be
an important reminder of the real value that the FIO adds to
the U.S. insurance, ultimately making it more stable and more
competitive, and I thank the gentlelady from Illinois, our
chairwoman, once again.
Chairwoman Biggert. Thank you, Mr. Gutierrez.
I now yield 1 minute to the gentleman from Virginia, our
vice chairman, Mr. Hurt.
Mr. Hurt. Thank you, Madam Chairwoman.
First, I would like to welcome Director McRaith to our
subcommittee. I appreciate your appearance here, and your
willingness to have a dialogue with us about what you see for
the future of this newly created Federal Insurance Office.
Today, the subcommittee continues its important oversight
of the insurance industry and the impact of Dodd-Frank on the
manner in which insurance is regulated. Dodd-Frank created the
FIO to represent the interests of insurers in the context of
international regulatory negotiations as well as advise the
FSOC on the risks associated with the insurance industry.
In our last hearing on these issues, I asked witnesses
whether the FIO would signify an expansion of Federal power and
bureaucracy in the arena of insurance regulation. With the
Federal Government's nose now under the tent of insurers, so to
speak, it is my hope that the FIO will not engage in mission
creep and instead adhere to the limited mission that Congress
intended it to serve. With our Nation over $14.5 trillion in
debt, my constituents, the citizens of Virginia's 5th District,
know that we cannot afford any new duplicative regulations or
bureaucracy. Excessive and unnecessary regulation of insurance
would only restrict consumer choice and hinder the growth of
free and open insurance markets.
Again, I want to thank the Chair for holding this hearing
today. I look forward to the testimony, and I yield back the
balance of my time.
Chairwoman Biggert. Thank you, Mr. Hurt.
The gentleman from Illinois, Mr. Dold, is recognized for 3
minutes.
Mr. Dold. Thank you, Madam Chairwoman, and I certainly want
to thank you for holding this important hearing.
Director McRaith, thank you so much for being here and for
your time.
As we all know, the insurance industry is a large and
critical component of our financial services industry and of
our economy generally. The insurance industry generally employs
well over 2 million Americans with stable and well-paying
private-sector jobs.
Our insurance industry is also the source of many billions
of dollars of private-sector investment capital every year.
These investments help other businesses get started, expand,
and create even more good, stable, well-paying private-sector
jobs in all kinds of various industries. And while providing
these direct and indirect jobs and other economic benefits, our
insurance industry provides many millions of American
policyholders with peace of mind, security, and compensation in
difficult, unfortunate, and oftentimes tragic circumstances.
But along with all of these positive factors, the insurance
industry has some challenges that Congress can and should
address.
The first and most urgent challenge is getting Congress to
pass responsible, long-term National Flood Insurance Program
reauthorization. Under Chairwoman Biggert's leadership, the
House has overwhelmingly passed that kind of legislation with
over 400 votes. We are all looking forward to a prompt Senate
passage and the President signing this important legislation.
But now we have an equally important obligation, to
carefully examine how Congress can help modernize the insurance
industry's regulatory framework while identifying and
supporting helpful industry-related initiatives. This raises
important questions about the interaction between Federal,
State, and other regulators, the interaction of regulations
among the different States, and how our domestic regulations in
trade agreements compare to those of foreign nations in an
interconnected global marketplace.
In the end, our objective here is to create the conditions
that will maximize private-sector job growth, economic
prosperity, and global competitiveness, while also ensuring
that consumers are adequately protected and have access to a
broad range of affordable insurance products. I look forward to
hearing from Mr. McRaith about how we can achieve these
objectives.
I won't have time to ask all of my questions during the
allotted period, so I will be submitting some written
questions, just to give you a heads-up on that. But my
questions will include things about the Volcker Rule, the SIFI
designations, regulatory uniformity and modernization, and the
NAIC's regulatory role.
Given this industry's vital importance to the
policyholders, American jobs, and the American economy
generally, we need to make sure that our legislation and
regulatory framework aren't going to have negative, unintended
consequences, aren't going to impose undue costs on insurers
and their policyholders, and aren't going to unnecessarily
limit our economic growth and our job growth as well.
So, with that in mind, I thank you in advance both for your
testimony here today and for your responses to the written
questions.
And, with that, Madam Chairwoman, I yield back.
Chairwoman Biggert. Thank you, Mr. Dold.
Without objection, all Members' opening statements will be
made a part of the record.
Now, we will hear from our esteemed witness, the Honorable
Michael McRaith, Director, Federal Insurance Office, U.S.
Department of the Treasury. You will be recognized for 5
minutes, and then the Members will have 5 minutes each to ask
their questions.
STATEMENT OF THE HONORABLE MICHAEL MCRAITH, DIRECTOR, FEDERAL
INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY
Mr. McRaith. Chairwoman Biggert, Ranking Member Gutierrez,
and members of the subcommittee, thank you for inviting me to
testify today. I am Michael McRaith, Director of the Federal
Insurance Office in Treasury.
The Dodd-Frank Act created the Federal Insurance Office, or
FIO, and, among other things, gave it the authority to monitor
the insurance industry, to monitor the accessibility and
affordability of insurance to underserved communities, to
develop and coordinate Federal policy on international
insurance regulatory matters, and to represent the United
States at the International Association of Insurance
Supervisors. In a role that will continue to develop, FIO is
now a central point of contact for insurance supervisors from
around the world. Our leadership will provide needed clarity on
relevant U.S. positions.
On October 1st, FIO became a full member of the
International Association of Insurance Supervisors (IAIS),
marking the first time the United States Government has a voice
in the coordination and development of international insurance
regulatory standards. With the IAIS moving to designate
globally significant insurers, FIO involvement has arrived at a
critical moment. The IAIS is also developing a common framework
for the supervision of internationally active insurance groups,
a project with which the FIO will be increasingly engaged. And
with the EU and the U.S. discussing regulatory equivalence, the
FIO will work with State insurance regulators and our EU
counterparts so that the regulatory systems of one country or
continent do not favor or disadvantage insurers based
elsewhere. In every forum, our objective shall be to shape
international consensus where appropriate on issues important
to the United States.
FIO is authorized to gather information, as required by the
Dodd-Frank Act. We will first seek data from public sources, a
Federal or State regulator, or the Office of Financial Research
before seeking information from an insurer. As we have to date,
FIO expects to work closely with regulators when data is
needed.
The Financial Stability Oversight Council was created to,
among other things, identify and respond to threats to
financial system stability. FIO is an advisory member of the
Council, and I look forward to working with Roy Woodall, the
Council's independent insurance expert, and Director John Huff
of Missouri, the State insurance commissioner. With Mr.
Woodall's recent confirmation, the Council now benefits from
the input of three insurance experts.
FIO has made progress in other important ways. In May, we
announced the formation of a 15-member Federal Advisory
Committee on Insurance, approximately one-half of whom will be
State insurance regulators. Applicants include many leaders
from across the industry spectrum. We are completing the
evaluation process and hope soon to announce our appointments.
FIO is preparing a study and report on how to modernize and
improve the system of insurance regulation in the United
States. A Federal Register notice seeking comment was published
on October 17th, and the comment period closes December 16th.
We welcome comments on all relevant topics.
We continue to build FIO to expand resources and expertise.
This week, four positions were posted at USAjobs.gov as part of
our effort to construct a strong and talented team.
To be sure, FIO is not a regulator. That remains the
province of the States. In June, I concluded more than 6 years
as the Illinois insurance commissioner and have great respect
for the work of State regulators. State regulators have broad
daily responsibilities including solvency oversight, product
form approval, consumer complaints, and producer licensing.
FIO is committed to establishing a collaborative
relationship with State insurance regulators, and we have
worked to develop the custom and practice of interaction with
the States that will serve the best interests of the U.S.
economy, the insurance industry, and our insurance consumers.
Insurance is an enormous, multifaceted industry subject to
complicated regulatory oversight. Chairwoman Biggert, I affirm
our commitment to work with and to support Congress, this
committee, and others as you seek analyses or perspectives on
insurance topics of local, national, or international interest.
Thank you for your attention. I look forward to your
questions.
[The prepared statement of Mr. McRaith can be found on page
24 of the appendix.]
Chairwoman Biggert. Thank you for your testimony.
Without objection, your written statement will be made a
part of the record. With that, I will recognize Members for 5
minutes to ask questions. I yield myself 5 minutes.
In your written testimony, you state that the FIO will
consult and work closely with State insurance departments which
remain the functional regulators over the business of insurance
as we develop Federal insurance policy on insurance matters. I
know that you just said that FIO was not a regulator, but would
you repeat that and give us some more insight into why it is
not a regulator?
Mr. McRaith. Sure. We should start, of course, with the
Dodd-Frank Act itself, which is explicit that the Federal
Insurance Office is not a regulator, it is not a supervisor.
The authority, the day-to-day responsibility to regulate the
insurance sector remains the province of the States.
Chairwoman Biggert. Thank you.
As our country struggles with a slow economic recovery, and
national unemployment is 9.1 percent, do you think that
Congress and the Federal agencies or States should take any
action to foster our insurance markets or are they functioning
well?
Mr. McRaith. The measurement of a well-functioning
insurance market is subjective. Depending on which economist
you ask, which consumer you ask, which company you ask, you are
likely to receive many different viewpoints.
For example, the property and casualty market, by and
large, is extremely competitive. Those of us who watch sporting
events see the competition for personal lines' auto coverage,
for example, and we know how competitive many of those lines of
insurance are.
Having said that, we should evaluate and continue to
evaluate all aspects of the insurance regulatory system, the
insurance sector, and evaluate whether there is a better way to
do what we are doing now, a better way to protect consumers, a
better way to provide affordable, accessible coverage, a better
way to allow the insurance sector based in the United States to
compete internationally.
Chairwoman Biggert. I am sure that, like me, you have heard
from our U.S. insurers that they face great regulatory
uncertainty, especially as it relates to the Dodd-Frank Act
provisions that could lead to insurers being regulated by
Federal bank regulators and being subject to higher capital
standards and restrictions on investment and payments to a new
Federal bailout fund. What are your plans in addressing these
uncertainties?
Mr. McRaith. I would clarify that those uncertainties at
this point are largely hypothetical. There is no definition as
to what any enhanced supervisory standard might be with respect
to an insurance company. We do know that the FSOC has recently
published a proposed rule and guidance that gives some clarity
on how a company will be designated. That, of course, would be
the first step before any enhanced supervisory standards are
applied.
Chairwoman Biggert. I think the one thing about the--
Mr. McRaith. Just to finish that thought, Madam Chairwoman.
Chairwoman Biggert. Okay, sure.
Mr. McRaith. And I apologize. As a member of the Financial
Stability Oversight Council, I will work with Mr. Woodall, as I
mentioned, the independent insurance expert on the Council, and
John Huff, the State insurance commissioner, and we will do our
best to inform the Council and the members of the Council as to
the operations of the insurance sector, why it operates or
behaves in a certain way in any given circumstance.
Chairwoman Biggert. Thank you.
I think one of the things that this committee was concerned
about and one of the things that the industry was concerned
about was the lack of having you and Mr. Woodall at the table
when FSOC was making policy, and I--was there anything, have
you found, that transpired that would affect the insurance when
you weren't there and could be corrected or should be
corrected?
Mr. McRaith. I think it is notable that the Council
published the proposed rule and guidance in 2010. There were
many comments, including from the insurance sector, asking for
more clarity, and just recently the Council re-proposed the
rule and guidance with the benefit of insights not only from
Director Huff but also from me as the FIO Director, and Mr.
Woodall had been in his position for a few weeks prior to the
publication of that proposed rule and guidance.
Chairwoman Biggert. So you think that there wasn't anything
that transpired that you would like to undo?
Mr. McRaith. No, I have not seen anything like that, Madam
Chairwoman.
Chairwoman Biggert. Okay. Thank you.
My time has expired, and I recognize the ranking member,
Mr. Gutierrez, for 5 minutes.
Mr. Gutierrez. Thank you very much.
Welcome, Mr. McRaith. We are happy to have you here. I am
happy we cleared up the regulatory issue, although we were very
explicit in the Dodd-Frank bill, as you have repeated here
again, in terms of the regulatory.
I guess the first thing on regulatory--back in Illinois, I
guess the gas company would charge whatever they want. I am
sure they are saying regulation gets in the way of their
profit. The electric company would say the same thing. I guess
a slum landlord would say the same thing about regulatory
issues when it comes to certain standards that you have to give
housing. I could just go on and on and start thinking about
people who would love not to have any regulation. I guess the
guys at Worldcom, too, a little regulation got in their way,
along with Enron, because they kind of created their own
regulations.
So I just want to talk about why is it that we have the
FIO. Does it have anything to do with regulations or lack of
regulations in the past, and what is your role in the future?
Mr. McRaith. Thank you, Congressman, for your kind words. I
am happy to be here to work with you in this capacity.
The FIO will monitor the industry, attempt to serve the
Financial Stability Oversight Council and other aspects of the
Federal Government, including Congress and this committee, by
providing insurance expertise, by providing a solid, objective,
reliable understanding of the operations of the sector, and the
impact on consumers. In that, we are also required to monitor
the affordability and accessibility of insurance to
traditionally underserved communities; we will be working with
State insurance regulators.
Mr. Gutierrez. But that might cost the insurance industry
money and be regulatory, wouldn't it, if you have to monitor
them? It might cost money to make sure that poor people can get
car insurance and underserved communities might be able to--
Mr. McRaith. I think that--
Mr. Gutierrez. Not that I mind, because I think everybody
should be served, just to make that point.
Mr. McRaith. I think the word ``monitor'' is an important
word that we are working to define as we move forward. Our
objective is to be faithful--
Mr. Gutierrez. Then let me ask you the question, who
monitored and regulated AIG at the Federal level before its
collapse and subsequent bailout by the Federal Government?
Mr. McRaith. So AIG had 247 different operating companies.
At the holding company level, it was regulated by the Office of
Thrift Supervision.
Mr. Gutierrez. Okay, and so were they doing a very good job
of watching them? Did they ever warn them? Did they tell them,
you shouldn't do this? Did they tell them about the credit
swaps? Did they tell them about the potential that they had for
crippling our financial markets in the United States? Were
there any warnings?
Mr. McRaith. I think Congress and the country have
addressed that question by passing the Dodd-Frank Act.
Mr. Gutierrez. So the answer is no?
Mr. McRaith. I think it is clear that AIG at the holding
company level did have a number of deficiencies, and many would
argue that it was not properly supervised.
Mr. Gutierrez. Because, basically, insurance has always
been regulated at the State level, hasn't it?
Mr. McRaith. That is correct.
Mr. Gutierrez. And it really hasn't been regulated at the
Federal level?
Mr. McRaith. That is correct.
Mr. Gutierrez. Wouldn't you say that insurance companies
have not been monitored and regulated at the Federal level,
though, in the same way a bank or a savings and loan is
regulated and monitored at the Federal level?
Mr. McRaith. I would say that the Federal Insurance Office
marks the first time within the Federal Government that there
is an office dedicated to monitoring the insurance industry.
Mr. Gutierrez. So it would be fair to say that the creation
of the FIO gives the first monitoring level to insurance
companies at the Federal level?
Mr. McRaith. It is fair to say that we are the first office
in the Federal Government created with the explicit statutory
responsibility--
Mr. Gutierrez. So are you watching out to make sure AIG
doesn't go adrift once again?
Mr. McRaith. We are absolutely engaged with the Financial
Stability Oversight Council. One of our core objectives, of
course, is to identify regulatory gaps, where are there
potential inadequacies in our regulatory system, to support the
efforts of the Council, which has the objective of preserving
and enhancing financial system stability.
Mr. Gutierrez. I want to thank you.
Let me just suggest to you, since you are not a regulator
and you are a monitor, if you monitor AIG, could you call me
right away so we can tell the world about the pending disaster
in case they come once again to cripple our economic system?
Thank you so much.
Mr. McRaith. Thank you.
Chairwoman Biggert. Thank you.
The gentleman from Virginia is recognized for 5 minutes.
Mr. Hurt. Thank you, Madam Chairwoman.
Just to clarify, based on the last line of good
questioning, it is my understanding that the FIO is not going
to be looking at holding companies like AIG. You will be
looking specifically at insurance companies; is that right?
Mr. McRaith. If that is--
Mr. Hurt. Or insurance-related business.
Mr. McRaith. Excuse me?
Mr. Hurt. Insurance business.
Mr. McRaith. The statutory language, Congressman, is that
the Federal Insurance Office will monitor the insurance
industry, including identifying gaps in the regulatory system
that may contribute to or threaten financial system stability.
Mr. Hurt. But just so we don't get confused and we remain
focused on trying to get at the issues that we want to get at,
honestly, in an effective way, it is important to note--and
this is my recollection--but at the end of the day, the
insurance business at AIG was not the problem. It had to do
with its holdings and derivatives?
Mr. McRaith. It is absolutely correct that the FIO will not
be regulating financial holding companies.
Mr. Hurt. Okay.
I have the same concern I think the Chair expressed, that
at a time when we have 9.1 percent unemployment--I come from a
rural southern Virginia district. We have 20 percent
unemployment in some parts of my district. We are borrowing 40
cents on every dollar. So I think that no one here--or I can't
speak for anyone else, but I will say for myself, I am not here
to say that we don't need any regulations. I am not saying that
at all. But what I am saying is that when we do know that
regulations cost money and they cost--and that money translates
to jobs, I think we need to be aware of that.
I think we also need to be aware of the fact that the
government is borrowing 40 cents on every dollar it spends and
therefore has fewer resources to do proper regulation, just to
do a proper job.
So I think that as we look at your role going forward, we
need to keep those things in mind, and the two questions that I
have really relate to what I said in my opening statement, but
the first is on data collection. Can you talk a little bit
about what you think that you will be able to do without
requiring additional burdens on the private sector and be able
to get from regulators?
And then, what is it that you contemplate, if you can tell
us, will have to be obtained over and above and create new and
additional burdens that I am sure the companies will want to
provide to you and be cooperative, but, at the same time, these
are burdens, and let's be clear.
Could you talk just specifically about that? And then, I
have one other question.
Mr. McRaith. Sure. Congressman, the Dodd-Frank Act requires
us to seek, request, obtain information from publicly available
records, from State or Federal regulators, from the Office of
Financial Research, before we ever ask an industry participant.
Mr. Hurt. Okay, so what does that mean practically? Do you
know enough yet to know whether or not that means that there
will be a great deal of volume that you will have to ask for
that won't currently be provided through the regulators?
Mr. McRaith. As you have heard today, I spent more than 6
years as the insurance commissioner in Illinois. I am very well
versed on the extensive reporting that insurance companies are
required to do on a quarterly or annual basis to the State
regulators. That information is then compiled through the
National Association of Insurance Commissioners.
At this point, Congressman, I can tell you that we have not
needed information beyond what the regulators have already
collected. Having said that, it would be--and I hope you
understand I can't predict all of the information we will need
in the future.
Mr. Hurt. Of course.
Mr. McRaith. But, again, our statutory obligation we intend
to honor both in the spirit and the letter of the law. We will
always pursue the information we need from a Federal agency or
publicly available source, and only if it is unavailable at
that point would we ask the industry for anything.
Mr. Hurt. Thank you. It looks like my--I don't have time
for another question, so I will yield back. Thank you.
Chairwoman Biggert. Thank you.
The gentlelady from New York, Ms. Velazquez, is recognized
for 5 minutes.
Ms. Velazquez. Thank you, Madam Chairwoman.
Good afternoon. Some experts are concerned that data-
gathering activities of the FIO will impose duplicative
requirements on insurers, ultimately resulting in higher costs
for consumers and businesses. How does your office plan to
mitigate the cost of data gathering?
Mr. McRaith. To be clear, the statute requires that the
Federal Insurance Office first request, seek, obtain
information from a public source or from a State or Federal
agency or from the Office of Financial Research before asking
the industry for anything. I know very well what data that
companies are required to produce, and report every year to
State insurance regulators. To date, we have not needed data
beyond what is already reported by the companies to the States.
So to get to your question, because we are obligated to ask
State regulators for information first or Federal regulators,
whichever, we will never ask a company for information that
they have already provided to another regulator. The
possibility of a duplicative request, therefore, is not--it is,
frankly, not possible.
Ms. Velazquez. Nor should costs be passed on to individuals
or businesses?
Mr. McRaith. That is correct.
Ms. Velazquez. One function of the Office of Financial
Research is to make data available to the general public to
increase transparency of the financial industry. Can you tell
us what benefits we should expect from increased transparency
of the insurance industry?
Mr. McRaith. Much of the information that is collected and
is company specific, if it is publicly available, that
information may help this committee, may help Congress, may
help the public understand what the financial status is of the
company in which we are interested, and what the financial
status is of the industry as a whole.
Ms. Velazquez. Even after passage of the Dodd-Frank Act,
State regulators remain solely responsible for consumer
protection in insurance matters. In your opinion, should the
CFPB assume part of this responsibility to ensure uniformity
and a level playing field, and how can the CFPB assist States
in these efforts?
Mr. McRaith. The CFPB has explicit statutory authority and
limitations. I would encourage you, Congresswoman,
respectfully, to reach out to that agency to ask how they can
be helpful in that regard. It would be inappropriate for me to
comment at this time.
Ms. Velazquez. Okay. Thank you.
Chairwoman Biggert. The gentlelady yields back.
The gentleman from Illinois, Mr. Dold, is recognized for 5
minutes.
Mr. Dold. Thank you, Madam Chairwoman.
Director McRaith, as you know, the Volcker Rule prohibits
or places restrictions on certain types of financial activities
deemed high risk or that create potential for a high exposure
to taxpayer losses. Insurance companies that own or operate an
FDIC-insured thrift institution are covered entities and
therefore must adhere to certain restrictions mandated by this
rule.
Everyone recognizes the Dodd-Frank statutory exemption
which would allow insurers to continue proprietary trading
activities in their general accounts. This shows that
legislators and agencies recognize that investing for insurance
companies' general account should be permitted, as these
investments are solely for the general account and are
rigorously regulated by State insurance departments.
Although Dodd-Frank provided this proprietary trading
exemption for insurers with small thrifts, there is an open
question as to their ability to continue investing in private
equity and hedge funds for their general accounts. Currently,
many insurance companies invest in private equity long term to
match the lives of their beneficiaries. These investments are
not short-term or quick investments. They are along the lines
of 10 to 15 years. Additionally, they are well regulated by the
State insurance departments, as you are well aware.
As the FIO Director, one of your principal functions is to
identify issues or gaps in insurance regulations. Based on your
expertise and experience in State insurance regulation, do you
see any reason to prohibit these types of investments?
Mr. McRaith. Congressman, I am very familiar with the
operations of the industry and individual companies within the
industry, including those within your home State, and my home
State as well.
I am also aware that there are a couple of rules that have
recently been proposed on this subject matter. The Federal
Reserve, the OCC, and the FDIC proposed rules, and the comment
period expires or closes January 12th. The FCC proposed a rule
on this subject matter that closes January 13th. I think the
CFTC has a rule on this subject matter that is forthcoming. I
encourage all interested parties, including the insurance
industry, to submit comments. I would prefer that those
agencies directly involved with the development of that rule
hear and develop their own rules on that.
Mr. Dold. You understand my concern. You just named several
different agencies that are all trying to weigh in on this, and
the opportunity to have more confusion and uncertainty is
certainly significant. So would you rank over them in terms of
what an insurance company could and could not do or would you
have to--will we have conflicting potential rules out there?
Mr. McRaith. The law is clear that those agencies--
independent agencies, I might add--are all asked to develop the
rule. Treasury had a role in coordinating but not in developing
the substance or content of the rule, Congressman.
Mr. Dold. A couple of weeks ago, the FSOC released another
proposed rulemaking notice on nonbank financial companies which
provides more detail on the designation framework. Generally,
the FSOC seeks to assess the company's financial distress on
the broader marketplace based on three categories: size;
substitutability; and interconnectedness.
As it relates to insurance companies, it seems that, based
on the proposed framework, an insurance company may have
sizable assets and operations. However, with respect to
substitutability and interconnectedness criteria, insurance
companies appear to be less systemically significant and thus
would not pose a threat to the financial stability of the
United States and therefore should not be subject to the
supervision by the board and enhanced prudential standards.
Since the principal function of your position is to
recommend which insurance companies may be subject to a
designation as systemically significant, would you agree that
nonbank financial companies should not be subject to a
systemically important designation based on their size alone,
as scale, interconnectedness, and substitutability of such
entities all mitigate the impact of such entities on the
financial stability of the United States?
Mr. McRaith. As you point out, Congressman, the Dodd-Frank
Act has established the criteria by which individual
institutions will be evaluated. There is not, of course, a
blanket exemption for an industry or category of institution.
The proposed rule and guidance are open for comment at this
time, I think it is until December 17th or 19th. Forgive me for
not knowing the exact date.
Mr. Dold. We will forgive you.
Mr. McRaith. But in the middle of December, the comment
period will close. I encourage any interested institution or
industry to submit comments and reply to the proposed rule and
guidance.
Mr. Dold. In my last 9 seconds, Director McRaith, would you
not agree that an institution that has filed for restructuring
through bankruptcy provisions would not be or should not be
subject to the SIFI designation?
Mr. McRaith. Without knowing more about the individual
company or the myriad variables that might apply, it would be
irresponsible for me to answer that question, Congressman.
Mr. Dold. Thank you.
I yield back.
Chairwoman Biggert. The gentleman yields back.
The gentleman from Missouri, Mr. Cleaver, is recognized for
5 minutes.
Mr. Cleaver. Thank you, Madam Chairwoman.
Mr. McRaith, welcome to the committee.
Mr. McRaith. Thank you.
Mr. Cleaver. This is your fourth, fifth month on the job?
Mr. McRaith. Fourth.
Mr. Cleaver. Fourth. Are you jubilant?
Mr. McRaith. There are a lot of words I would use to
describe my experience, but I would say, in all sincerity, it
is a tremendous privilege to work at the Department of the
Treasury and to be able to work with this Congress and this
committee again.
Mr. Cleaver. Agree. John Huff from Missouri, my State,
speaks highly of you and enjoys working with you; and my
question, my single question relates to that.
You are working closely with two other Council members, Roy
Woodall and, of course, John Huff, and I am just curious about
how that plays out. Do you think we are duplicating anything?
Do you think there are similarities that we can further
separate or distinguish? What are the differences and how do
you think this trio is working--
Mr. McRaith. Congressman, Director Huff is a tremendous
professional and an example of the very best in State
regulation, and he is also a great friend. I would say that,
however, even if he were not a great friend. So I appreciate
his kind words to you.
We will work closely together. The insurance sector
reported in excess of $7.1 trillion in assets in the end of
2010. That means that Mr. Woodall, the independent expert who
is a voting member of the FSOC, of the Council, Director Huff,
and I have a lot of work to do. We have to work closely
together, we have to communicate on a regular basis, we have to
be sure that the other members of the Council receive the
benefit of our expertise, of our perspectives, and any decision
made by the Council should be informed by our viewpoints. How
that will play out in any one day or week, we will have to see.
But I am entirely confident, knowing the professionalism of
Director Huff and Mr. Woodall, that we will be able to handle
any challenge that comes our way.
Mr. Cleaver. So you don't envision any trespassing, where
someone's turf is invaded intentionally or unintentionally.
Mr. McRaith. These are new interactions for the three of
us. However, as mentioned earlier, the limitations of the FIO
authority are clear. We do not regulate the business of
insurance. That remains the province of the States. My
expectation is whatever difficulties or challenges we
encounter, we will be able to work through and establish a
paradigm that will serve the Council and the country well going
forward.
Mr. Cleaver. Thank you.
Madam Chairwoman, I yield back the balance of my time.
Chairwoman Biggert. Thank you.
The gentleman from Ohio, Mr. Stivers, is recognized for 5
minutes.
Mr. Stivers. Thank you, Madam Chairwoman.
Mr. McRaith, thank you for being here today. I appreciate
your forthright answers.
I know you were formerly involved with NAIC, and I think
you testified before a predecessor of this committee in June of
2008. I think you said something--and I will paraphrase your
words for lack of an exact quote--like the State system of
insurance regulation has outperformed the Federal counterparts
that regulate the securities and banking industry as far as
both protecting security of consumers and maintaining solvency
of the industry.
Do you still feel like that is true?
Mr. McRaith. Congressman, as mentioned, I served over 6
years as a State insurance regulator, and I have tremendous
respect for the professionals who serve in departments around
the country. In every State in this country, consumers are well
served by very capable, hardworking, ethical regulatory
professionals. The traditional PNC life insurers did fare well
going through the crisis.
Mr. Stivers. And as a follow-up to that, was it the
regulated insurance products of AIG or the unregulated
derivatives--and you have kind of already answered this--that
helped lead to the downfall of the AIG and the collapse of the
financial markets?
Mr. McRaith. The autopsy has, frankly, shown that it was
not the insurers that caused problems for AIG as a holding
company.
Mr. Stivers. Great. Thank you.
The FIO is charged with doing a study of whether any
additional--I won't use the word regulation--coordination is
needed in the Federal office for insurance markets. What are
you doing to make sure that the bias of your agency--basically,
you are getting to answer the question, do I need to do more?
What are you doing to make sure that there is not a bias toward
additional Federal involvement in insurance?
Mr. McRaith. Congressman, let me be clear about AIG. We
should not use that as an example, and we should not use the
recent crisis as a reason not to examine or explore whether we
can better regulate the insurance sector. Are there
inefficiencies? Are there inadequacies in the system? For
purposes of the modernization in improvement report that we are
required to publish, we will study all challenges and problems
within--or potential gaps within the existing insurance system.
Mr. Stivers. And that is great. Are you doing anything to
ensure that the bias doesn't come back that automatically says,
I am the one deciding and I think I should do more? That is my
question.
Mr. McRaith. I think you just asked me if I still agreed
with my statement from 2008. I think I gave you a direct answer
on that.
Mr. Stivers. Yes.
Mr. McRaith. And I would say that the bias is framed by the
statute. The statute requires us to study these issues, gave us
considerations--six considerations, six factors. We will study
those factors and considerations, we will consider comments we
receive, and we will report back as required by the statute.
Mr. Stivers. That is great. That is a good answer.
On subpoena authority, there seems to be a principle of
regulatory law that usually it is only a regulator that has
enforcement authority, that has subpoena power, but you have
been given subpoena power. Do you expect to use that subpoena
power or do you expect to work through State regulators? I
think you have already answered this question, but I would just
like to hear you kind of answer it directly.
Mr. McRaith. The subpoena power as framed by the statute
would be used only in the event we cannot, for whatever reason,
receive data from a State regulator, a Federal regulator, the
Office of Financial Research, or we ask a business of insurance
participant to produce information which they then refuse to
produce. We then have to write findings in support of our
subpoena and then issue the subpoena.
So the possibility of actually issuing a subpoena to
collect information is extremely unlikely and would only be
necessary, in my view as I sit here today, in circumstances
where all of us agree it would be appropriate for the company
to provide us with information.
Mr. Stivers. One last quick question and that is, do you
expect to get involved in issues like the tax-free buildup of
insurance? Frankly, there are a lot of Federal policies that
sort of determine the viability of insurance. Do you expect to
get involved? And I hope you will, because the other committees
have jurisdiction matter on the viability of insurance.
Mr. McRaith. I think our portfolio and the range and
breadth of that portfolio is still being defined, Congressman,
so we look forward to suggestions from any interested party on
any issues involving the insurance sector.
Mr. Stivers. Thank you.
I yield back my nonexistent time, Madam Chairwoman.
Chairwoman Biggert. The gentleman's time has expired.
We are going to turn next to the gentleman from Texas, Mr.
Green, for 5 minutes. Thank you for being here again.
Mr. Green. Thank you, Madam Chairwoman. I especially thank
you for allowing me to be a part of the subcommittee. I thank
the ranking member as well, in his absence.
And, Mr. Director, I thank you for appearing today.
You indicate on page 2 of your statement that--and I will
try to quote you as accurately as possible--``The Dodd-Frank
Act requires the FIO to issue a report for modernizing and
improving the system of insurance regulation in the United
States.'' Could you just briefly give me your thoughts in terms
of what this actually means, the insurance system in the United
States? Federal, State, combinations thereof? Would you please,
just briefly?
Mr. McRaith. The statute, Congressman, asks the Federal
Insurance Office to study and report on how to modernize and
improve the system of insurance regulation in the United
States. In my view, the statute uses the word ``system'' in
referring to the State-based system of insurance regulation.
The statute lays out six considerations and six factors by
which the study and report are to be guided.
Mr. Green. And one would assume that you are interested in
hearing from consumers as to what their thoughts are to help
you make prudent, judicious decisions with reference to
modernizing. Is this a fair statement?
Mr. McRaith. Congressman, that is absolutely true. In fact,
the statute requires us to consult with a full range of
interested parties, including consumers. We would do it whether
the statute required us to do it or not, but we absolutely are
interested in and want to hear the consumer viewpoints on the
regulation of the insurance industry.
Mr. Green. Thank you, and I greatly appreciate your desire
to get that kind of input.
How do you publish your notice such that consumers across
the length and breadth of a country may be aware that their
comments are welcome? How do you publish it? Do you use
newspapers, television, radio? What do you do to get the
clarion call for input out?
Mr. McRaith. Congressman, it may surprise you that a
request for comment on how to improve and modernize the U.S.
system of insurance regulation does not attract headlines in
every newspaper. People Magazine is not actually interested in
that topic. However, we did publish notice in the Federal
Register in which we asked for comment. We also issued a press
release announcing the request for comment that went out to
publications and media outlets around the country.
Mr. Green. My suspicion is that a good number of persons in
States along the Gulf Coast would be exceedingly interested,
and the question becomes, how do you get this message beyond a
press release? I understand that you don't have the funds to
purchase the air time or to purchase the space in major
newspapers, but it is important that we get this message to
people in areas where they have been impacted by insurance
issues, for example, whether it was wind or water that caused
damage. It is a big deal along the Gulf Coast, and my suspicion
is that people who live in these areas where they are impacted
adversely would want to have some commentary.
The problem is, how do you get the message to them? And I
don't know whether we need to come up with something more.
Would you be amenable to going into the area if a Member
invited you to come to an area to discuss these issues at a
town meeting? Is this something that you do? I am not trying to
create new protocols for you. I am sincerely trying to find out
how I can get my citizens, my constituents, my consumers, the
opportunity to be heard.
Mr. McRaith. Allow me to add some depth to what will be our
consultation and outreach program.
The Federal Register notice is just one component of that,
Congressman. We will also engage individuals representative of
communities like those you are describing. We will aggressively
outreach to consumer advocacy groups and solicit their comments
both in writing and verbally. If there is any group or
individual you suggest that we meet with or hear from, please
let us know.
Mr. Green. With the 9 seconds left, what about the town
halls? Do you come into a district, if invited, to a town hall
meeting and stand there with me as we embrace our constituents?
Mr. McRaith. Congressman, I know that we are open to any
reasonable possibility to receive input from consumers, from
the people in your district, and from around the country.
Mr. Green. Thank you very much, Madam Chairwoman. I am
honored to yield back.
Chairwoman Biggert. The gentleman's time has expired.
The gentleman from Georgia, Mr. Westmoreland, is recognized
for 5 minutes.
Mr. Westmoreland. Thank you, Madam Chairwoman.
Mr. McRaith, do you consider--I know the ranking member
mentioned credit default swaps with AIG. You really don't have
any jurisdiction over a credit default swap, do you?
Mr. McRaith. That is correct.
Mr. Westmoreland. Do you consider a credit default swap
insurance?
Mr. McRaith. That is a subject matter that has been the
focus of debate for at least a few years, as you perhaps know,
Congressman. It was the subject of attention from I believe the
New York Insurance Department a couple of years ago. I think
State insurance legislators attempted to pass a model law
allowing the States to regulate those types of products. But as
I sit here today, I am aware that there are Federal agencies,
independent agencies evaluating that question, how to define a
credit default swap.
Mr. Westmoreland. Do you consider a credit default swap
insurance?
Mr. McRaith. Congressman, I need to defer to the agencies
that have proposed a rule on that subject matter and are
jointly working on it.
Mr. Westmoreland. So you don't have an opinion on whether
it is insurance or not?
Mr. McRaith. Given the importance of the question, and
given the range of comments those agencies received, I think it
is appropriate for me to let them do the good work they are
trying to do.
Mr. Westmoreland. Let me ask you about the statutory
accounting principles that insurance uses, and the Federal
Reserve uses, the Generally Accepted Accounting Principles
(GAAP). Do you see a problem if the Federal Reserve wants to
make the insurance companies start using their accounting
methods, rather than the ones they have adopted or have adopted
now?
Mr. McRaith. Congressman, the publicly traded insurance
companies, of course, already prepare and report according to
generally accepted accounting principles. The mutual companies
do not publicly disclose accounting according to GAAP, but
according to the statutory accounting practices and principles.
I am not aware that the Federal Reserve has announced its
intention or objective with respect to the accounting
principles. As we move forward, my expectation is that the
Federal Reserve would make a considered, thoughtful choice on
that subject.
Mr. Westmoreland. But it could be rather expensive to the
insurance industry if they did ask that these reports be
changed to a different accounting practice. Is that true?
Mr. McRaith. Without knowing which company we are talking
about, I would only be speculating, which I don't want to do,
Congressman.
Mr. Westmoreland. Okay. Let me ask you, you worked in the
State insurance industry for, I guess, 6 years in Illinois and
evidently did a great job; and the monitoring that you are
talking about doing, I noticed it talked about accessibility
for minorities and low income. Did you have any of that
information at the State level?
Mr. McRaith. At the State level, we saw insurance companies
making homeowner or personal lines products available to people
regardless of the communities in which they lived. Having said
that, there are communities around the country asking the
question of whether insurance is as accessible and affordable
as it should be or can be.
Mr. Westmoreland. But, as far as Illinois went, you felt
comfortable that you were doing your job as a State regulator
to make sure that everybody had accessibility to these
policies?
Mr. McRaith. We in Illinois have exceptionally competitive
personal lines insurance markets, the most competitive markets
in the country. One way we measure accessibility is
participation in the residual markets, the FAIR plans, the
residual market for personal lines auto. The participation in
those programs was so small, among the smallest in the entire
country, and it is by that standard that I would take the view
that accessibility was not a problem--Statewide accessibility
was not a problem. There might be individuals who did encounter
challenges, however.
Mr. Westmoreland. But these reports you are going to get
are not going to make it any easier for you to tell where these
areas are at, if you could not tell?
Mr. McRaith. In the Federal Register notice that I have
mentioned a few times, we asked for interested parties to
recommend what factors or indicators we should consider as we
evaluate the best way to monitor accessibility and
affordability. It is my view that the consumers and industry
will allow us to develop a thoughtful approach on how best to
monitor accessibility. What exactly those data points will be,
Congressman, I can't tell you at this point.
Chairwoman Biggert. The gentleman's time is expired.
The gentleman from California is recognized for 5 minutes.
Mr. Sherman. Thank you.
I want to commend the gentleman from Georgia for his
questions.
Credit default swaps make--there is a technical argument as
to whether they are insurance, but functionally, they are
insurance. And the fact that they have escaped the technical
definition of insurance is why you and I and a few hundred
million other taxpayers are bailing out AIG. When you allow
insurance to be sold by companies that are not regulated
insurance companies, the outcome is not good.
And now, Director McRaith, I assume that the Federal
Insurance Office study due out in January on ways to improve
and modernize the current insurance regulatory system is a de
novo review that is going to take a fresh look at insurance
regulation and not just be a recycling of studies Treasury has
done in the past. Assuming I have read the old studies, am I
going to see new stuff in the new report?
Mr. McRaith. Congressman, it will not be a recycling of
anything that we have seen before.
Having said that, there may be principles that were
announced or described in another report. We may echo some of
those principles. However, the statute asks us to study, which
we are doing, and then to report, and it prescribes the
considerations and factors by which the study and report are to
be guided.
As I sit here today, I can promise you that review will be
based on the comments we receive, the consultation process we
are required to complete, and, ultimately, we hope to provide
you with a valuable piece of work.
Mr. Sherman. So everything in the new report is going to be
the result of new thinking, a new look at the situation, and if
it bears any resemblance to a former report that will be new
thinking leading perhaps occasionally to the old comment, but
it is 100 percent new thinking.
Mr. McRaith. That is a very broad statement, Congressman.
What I can promise you is that the report will be based on the
merits and the substance of the issue, on the practical problem
and practical solutions to any inefficiencies.
Mr. Sherman. Is there any page in the new report that you
are going to say, we didn't bother to think that one through
again, we just xeroxed an old report?
Mr. McRaith. Absolutely not.
Mr. Sherman. Okay. Now, do you anticipate that you will be
able to release the report according to the original deadline,
which was January 2012, or is that possibly going to slip?
Mr. McRaith. We are absolutely working with that deadline
as our target.
Mr. Sherman. Thank you very much.
I think we have votes on the Floor, so I yield back.
Chairwoman Biggert. Thank you, Mr. Sherman.
I think I just have one more question, and we do have votes
pending right now.
The United States is increasingly exporting services
abroad, and this certainly includes the financial services such
as insurance. How can we encourage this trend? And, in your
view, did the recent House-passed free trade agreements with
Colombia, Panama, and South Korea help U.S. insurers compete
abroad?
And along with that, along a similar line, to help our U.S.
insurers, including the reinsurance industry maintain a
competitive edge, it certainly is important that the United
States have a strong voice on related issues. Are you currently
working with USTR or other Federal or foreign entities on any
covered agreements or when do you plan to start working on
covered agreements? I know it has only been 4 months, so I am
sure you are quite busy with everything.
Mr. McRaith. Madam Chairwoman, we are, as you know,
authorized to develop and coordinate Federal policy on
international insurance regulatory matters for the United
States. We are authorized to represent the United States at the
International Association of Insurance Supervisors. In both of
those roles, we intend to participate on behalf of the United
States, and provide active, engaged leadership in a way that
respects the importance of the U.S.-based insurance industry to
the U.S. economy, and to the consumers and the employees of
those companies within the United States.
Having said that, how we achieve issues, how we achieve
goals like regulatory equivalence, how we achieve goals like
protecting U.S. companies from inappropriate international
standards, we intend to evaluate all of our options, including,
first of all, leading the consensus, the development of
consensus internationally, and, secondly, if needed, evaluate
whether a covered agreement is appropriate.
Chairwoman Biggert. Thank you. And will these--the free
trade agreements that were just passed, will they be of help?
Mr. McRaith. I would love to offer a view on that subject.
It is my expectation that they will, but I have not studied
those free trade agreements and can't give you an authoritative
answer.
Chairwoman Biggert. I do think that working with the USTR
in a global area was very important for FIO to be involved in,
and I am happy that you are doing that.
Mr. McRaith. Absolutely.
Chairwoman Biggert. We are having votes. The Chair notes
that some Members may have additional questions for you which
they may wish to submit in writing. And, without objection, the
hearing record will remain open for 30 days for Members to
submit their written questions to you and to place your
responses in the record.
And, with that, I would like to thank you again for being
here.
Mr. McRaith. Thank you, Madam Chairwoman.
Chairwoman Biggert. And we really will welcome you back,
probably in the near future, again. You have been a great
witness. So thank you for being here.
And, with that, this hearing is adjourned.
Mr. McRaith. Thank you very much.
[Whereupon, at 3:13 p.m., the hearing was adjourned.]
A P P E N D I X
October 25, 2011
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