March 23, 2011

NFI Insurance Reform Summit Follow-Up

Baker & Daniels LLP and B&D Consulting were pleased to support the 7th Annual Insurance Reform Summit presented by Networks Financial Institute in Washington, D.C., on March 16, 2011. This year's Summit focused largely on the Dodd-Frank Wall Street Reform and Consumer Protection Act passed in 2010, with particular attention given to the Federal Insurance Office and its looming report to Congress on the modernization of insurance regulation. A day after the Summit, Treasury Secretary Timothy Geithner announced that Illinois Insurance Director Michael McRaith will be the new Director of FIO.

Participants in this year's NFI Summit included leadership of the Senate Banking and House Financial Services Committees Sen. Jack Reed (D-RI) and Rep. Judy Biggert (R-IL), National Association of Insurance Commissioners President and Iowa Insurance Commissioner Susan Voss, NAIC representative on the Financial Stability Oversight Council and Missouri Insurance Director John Huff, Professor Scott Harrington of the Wharton School at the University of Pennsylvania, the American Enterprise Institute's Peter Wallison, Governor Dirk Kempthorne, President of the American Council of Life Insurers, and American Insurance Association President Leigh Ann Pusey. All research presented at the Summit is available on NFI's website, www.networksfinancialinstitute.org.

Below are a few points of interest from each speaker's remarks:

Terrie Troxel, Executive Director of NFI, provided the audience of industry professionals, legislators, Congressional staff, regulators, and academics with an update on NFI's education, outreach, and research initiatives since the last Summit.

U.S. Sen. Jack Reed (D-RI), Chairman, Subcommittee on Securities, Insurance and Investment, Senate Banking Committee

  • Senate Banking will be focusing on sustaining and accelerating economic recovery as well as Dodd-Frank oversight.
  • Dodd-Frank involved significant delegation to federal regulators; now the question is how those regulators effectively implement the necessary rules and ensure that they have adequate resources. Sen. Reed also said that there may be elements of Dodd-Frank that can be improved/changed.
  • FIO and the new Office of Financial Research have a big job to do in terms of giving the federal government the knowledge, data and insights it needs. It is critical that all three insurance seats on FSOC be filled.

U.S. Rep. Judy Biggert (R-IL), Chairwoman, Subcommittee on Insurance, Housing and Community Opportunity, House Financial Services Committee

  • The House Financial Services Committee agenda this year will be focused on jobs and oversight of the massive Dodd-Frank Act.
  • All three insurance slots in FSOC need to be filled so that the special attributes of the insurance sector are front and center: insurance companies are not banks!
  • Financial literacy, TRIA, GSE/housing reform, and the reform of the flood insurance program are priorities as are international coordination in the financial services sector and oversight of state-based insurance reforms.

Susan Voss, Iowa Insurance Commissioner and President, National Association of Insurance Commissioners

  • The cooperation among state and federal officials required by Dodd-Frank is good. We must have an open dialogue among stakeholders, regulators and legislators.
  • The three insurance people on FSOC have to bring their special insights to the FSOC table.
  • The states are working hard on the insurance exchanges at the heart of the health care/insurance reform, as they are on surplus lines.
  • Commissioner Voss' number one priority for Dodd-Frank implementation is to push hard to get the new annuity suitability model enacted in all 50 states.

John Huff, Missouri Insurance Director and Financial Stability Oversight Council Member

  • The NAIC and state insurance regulators have expertise, knowledge, data and insights to bring to bear as the country adapts to the Dodd-Frank requirements.
  • International matters loom large and have to be considered alongside domestic financial services reform.
  • FSOC, FIO, and other new structural elements in Dodd-Frank will require careful analysis by all stakeholders moving forward.

Governor Dirk Kempthorne, President and CEO, American Council of Life Insurers; Leigh Ann Pusey, President and CEO, American Insurance Association

  • Both CEOs laid out the industry's priorities, concerns and strategies for 2011 and beyond.
  • The three insurance people on FSOC (including the new FIO Director) will need to engage ASAP on all aspects of insurance in the new Dodd-Frank world.
  • Insurance is not banking and some of the structures in Dodd-Frank won't help insurance companies and their policyholders.

Scott Harrington, Alan B. Miller Professor, Wharton School, University of Pennsylvania

  • Harrington's policy brief is on NFI's website.
  • Harrington made detailed remarks on AIG, systemic risk (or lack thereof) in the insurance sector, and the implications of the new federal interest in insurance under Dodd-Frank.
  • He also gave suggestions of what should be at the center of FIO's insurance study scheduled for early 2012.

Peter J. Wallison, Arthur F. Burns Fellow in Financial Policy Studies, American Enterprise Institute for Public Policy Research

  • Wallison's policy brief is on NFI's website.
  • Wallison had detailed criticism of the Dodd-Frank Act and its theoretical and structural foundation: the resulting regulatory uncertainty is slowing economic growth.
  • He compared many of Dodd-Frank's requirements with the shortcomings of Congress' attempt to "reform" healthcare/insurance.

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