The new Federal Insurance Office is not trying to duplicate state regulation or increase the paperwork burden on insurance companies, Michael T. McRaith, the first director of the FIO, said during the Property/Casualty Insurance Joint Industry Forum.
McRaith offered his comments after several panelists raised concerns earlier about the specter of increased federal regulation.
For instance, David H. Long, president and chief executive officer of Liberty Mutual Group, had expressed concern federal regulators would set capital requirements, but state regulators would control rates, leaving insurance companies stuck awkwardly in the middle.
"To be clear, FIO is not a regulator. That remains the province of the states," said McRaith, who spent six years as the director of the Illinois Department of Insurance.
McRaith said a key responsibility of the FIO will be to monitor all aspects of the insurance industry. "Different people have offered different views about what monitoring the industry will look like," he said.
"Much of our effort will involve data analysis. I understand some in the industry question the need for the FIO's authority to ask for and receive information ... something of a cottage industry has developed around concerns that the FIO will duplicate the document requests that insurers receive from the states. These concerns are not well founded," McRaith said.
He said if the FIO needs information, it will seek it from a public source or a regulator, including the state insurance commissioners.
While the FIO has subpoena power, McRaith said it would only use that power if the information it seeks is not available from a public source or not available from a regulator.
The FIO expects to release its first major report, on how to improve and modernize U.S. insurance regulation, later this month, he said.
"We could write until the Chicago Cubs win the World Series and still not address" every issue that warrants modernization, McRaith said.
However, the report will address one of FIO's key responsibilities: how it intends to monitor access to affordable insurance for underserved consumers, he said.
The comprehensive report on the insurance industry was required under the Dodd-Frank Act.
McRaith touted the FIO as being the first single point of contact for international insurance issues, and said the FIO has joined the International Association of Insurance Supervisors.
"Of great interest to many here today is the [European Union's] Solvency II initiative," McRaith said. Solvency II "has some excellent components," he said, "as does the U.S. system."
He said there's uncertainty about the potential impact of Solvency II and whether it would result in any changes to U.S. regulation.
"We need clarity," McRaith said. The FIO will be a "national leader in the discussion on equivalency in the near term," McRaith said.
Systemic risk is also an issue that regulators and insurers are concerned with, he said, noting the Financial Stability Oversight Council was created to identify and respond to threats of financial system stability, including identifying systemically important financial institutions.
He did not give an opinion as to whether insurers should be considered systemically important financial institutions -- and as such, potentially face additional regulations -- but said he was looking forward to working with the council. The FIO is an advisory member of the council, he said.
The FIO has been fielding comments on what its role should be, including a call late last year from the Risk Management Society to play a larger federal role in insurance regulation.
RIMS commented that the existing state-led regulatory structure has inherent flaws, and said enacting an optional federal charter could help to address some of those issues