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The NAIC has long argued that the FIO has no statutory regulatory authority and cannot claim to represent US insurance regulators. But recent interventions by the FIO on insurers' use of captives, and level of its involvement with the International Association of Insurance Supervisors (IAIS) in designing new regulation for international groups and global systemically important insurers (G-SIIs) has magnified the threat of the FIO encroaching on to state regulators' turf in the eyes of the NAIC.
Ben Nelson, chief executive of the NAIC and former US senator, says: "The FIO has enough work to do under statute, it doesn't have to bleed over into the regulatory field. There's no requirement, it's not permitted; but we're always worried about mission creep."
Under the Dodd-Frank act, the FIO is empowered to represent the US, "as appropriate", in the IAIS. Currently, Michael McRaith, director of the FIO, sits as chairman of the IAIS technical committee that oversees the development of the Common Framework for the enhanced supervision of internationally active insurance groups (Comframe) and measures for regulating G-SIIs. "There's a question in my mind about whether or not serving as chairman of the technical committee constitutes an ‘appropriate' role given the fact that everyone else on that is a regulator", says Nelson.
In a testimony before the House of Representatives subcommittee on housing and insurance on June 13, Nelson laid out his expectation that the FIO would defer to, and support the views of, regulators in forums like the IAIS that "focus almost exclusively on regulatory issues that have little or no impact on FIO's authority or responsibilities". Yet Nelsons insists there is no turf war between the NAIC and FIO on the future of insurance regulation in the US. "It's not a dust-up, it's a difference of opinion in protecting the system that has been in place for so long and has been consistently improved over the years", he says.
There remain concerns, however, that the FIO lacks the resources and expertise to carry out even its very narrow statutory responsibilities. The Dodd-Frank Act required the FIO to produce a report to Congress on how to modernise and improve the system of insurance regulation in the United States by late 2011. It has yet to be published.
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