Committee probes strategic purpose of Federal Insurance Office

House Financial Services Subcommittee on Housing and Insurance Chairman Rep. Randy Neugebauer (R-Texas) said the strategic purpose of the Federal Insurance Office isn’t clear during a hearing on modernizing insurance legislation on Tuesday.

The FIO, which was established under the Dodd-Frank Wall Street Reform and Consumer Protection Act, has authority over all aspects of the insurance sector, monitors the availability of non-health insurance products and represents the United States in international insurance matters.

FIO recently completed a report that concluded that the state-based insurance regulatory system has created inefficiencies and burdens insurance companies and policyholders, costing up to $13 billion annually.

The report recommended encouraging states to improve uniformity, efficiency and consistency in the regulatory system.

“(The FIO report) glossed over many of the statutory requirements of the study, such as the feasibility of regulating certain lines of insurance at the federal level, and instead waded into many tangential issues like captive insurance regulation and corporate governance standards,” Neugebauer said. “The report also highlights FIO’s ambitions that go way beyond its statutory direction by directly advocating for federal regulation of mortgage insurance and more alarmingly suggesting the potential for binding federal standards for insurance risk classification methods.”

Neugebauer said he was disappointed that the report failed to clarify the FIO’s strategic purpose.

“Beyond its monitoring and consulting duties, the statutory objectives of FIO include assisting with (systemically important financial institution) designations for insurance companies, administering the Terrorism Risk Insurance Program, coordinating federal insurance policy overseas and making covered agreement preemption determinations,” Neugebauer said. “And yet, the initial SIFI determinations were met with strong dissent from federal insurance experts; there have been no formal comments on TRIA despite its impending expiration; constructive coordination on international issues is largely absent; and to date there have been no covered agreements.”

Neugebauer said he hoped for “constructive movement” on these issues in the year ahead.