Faegre Baker Daniels LLP and FaegreBD Consulting were pleased to partner again with Networks Financial Institute in presenting the 8th Annual Insurance Reform Summit in Washington, D.C., on March 21, 2012. This year's Summit focused on the continuing discussion about modernizing insurance regulation in the wake of the enactment of the Dodd-Frank Act in 2010, with particular attention to the Federal Insurance Office and its widely anticipated first report to Congress.
FIO Director Michael McRaith had been expected to speak at the Summit, but due to the delay in the release of the FIO Report, he was unable to speak.
Participants in this year's NFI Summit included U.S. Rep. Ed Royce; Susan Voss, National Association of Insurance Commissioners Immediate Past President and Iowa Insurance Commissioner; Roy Woodall, the voting independent insurance member on the Financial Stability Oversight Council; Professor Robert Klein of Georgia State University; Professor Jean Kwon of St. John's University; Richard de Haan and Thomas Ward of Ernst & Young; and an industry panel consisting of Brady Kelley, Executive Director of NAPSLO; Leigh Ann Pusey, President of the AIA; and Roger Schmelzer, President of the National Conference of Insurance Guaranty Funds.
All research presented at the Summit is available on NFI's website. Below are a few points of interest from each speaker's remarks:
Terrie Troxel, Executive Director of NFI, welcomed the audience of industry professionals, congressional staff, state regulators, Treasury Department and other federal officials, academics and industry stakeholders. He noted that much had happened since last year's Summit, including the Administration's naming of Michael McRaith, former Insurance Director of the State of Illinois, as the first Director of the newly established Federal Insurance Office in the Department of Treasury.
Congressman Ed Royce (R-CA), a senior member of the House Financial Services Committee:
- Rep. Royce said he supports Dodd-Frank's creation of FIO, which for the first time established a centralized voice on insurance issues in international forums and negotiations for the U.S. insurance industry.
- He reaffirmed his support for Optional Federal Charter legislation as a way to facilitate a more national insurance market.
- He commented on the NAIC, specifically mentioning his letter in which he questioned the status of the organization and acknowledged receipt of a response from the NAIC.
Roy Woodall, Financial Stability Oversight Council Voting Independent Insurance Member:
- Noting that he was limited by the confidentiality agreements he signed with the Department of Treasury, Woodall described the structure and process of FSOC and his role in its decision making process.
- He cited the previously released document entitled "Financial Stability Oversight Council Committee Structure" when describing the role and functions of FSOC.
- The independence of his role is important. Because of the wide-range of issues he is expected to vote on, he must be educated on several financial services issues beyond insurance.
Susan Voss, Iowa Insurance Commissioner and Immediate Past President of the NAIC:
- She outlined the effectiveness of state regulation of the insurance industry and the successes of that system in the aftermath of recent natural catastrophes and the 2008 financial crisis.
- She stated that the NAIC is not a regulatory body but instead is a coordinating group that looks forward to working with FIO.
- The focus of insurance regulation has expanded in recent years to go beyond simply the states to international regulatory bodies, and she stressed the importance of FIO's and the NAIC's participation in international bodies.
Richard de Haan and Thomas Ward of Ernst & Young presented their views on international regulatory convergence:
- Many countries are adopting Solvency II as their capital adequacy regime, though each country has tweaked it.
- The United States' Solvency Modernization Initiative — which remains to be finalized — will be reviewed by the European Union for equivalence with Solvency II, a determination that will have large ramifications for U.S. and foreign insurers.
Prof. Robert Klein, Georgia State University, and Prof. Jean Kwon, St. John's University:
- Klein and Kwon presented two papers giving their views on the state of insurance regulatory modernization.
- Klein laid out the specifics of Solvency II and compared it to the NAIC's Solvency Modernization Initiative.
- Kwon noted that the United States is a net importer of many insurance products, particularly in the reinsurance area. The reinsurance industry suffered a decline in jobs and premiums last year as well.
Brady Kelley, Executive Director of NAPSLO; Leigh Ann Pusey, President of AIA; and Roger Schmelzer, President of NCIGF:
- The industry panel reviewed the challenges for their organizations in light of the continuing dialogue about modernizing/improving insurance regulation.
- Kelley stressed the successes and future challenges of the Nonadmitted and Reinsurance Reform Act for the surplus lines industry. The home state premium allocation rule offers the industry's requested reform, but the two competing tax sharing proposals persist.
- Pusey highlighted the fact that the conversation at the Summit this year had shifted to a more global and international focus and gave some suggestions for defining the role of FIO.
- Schmelzer described the role and successes of the last four decades of the guaranty systems and how they fit into the larger insurance regulatory and consumer protection fabric. Schmelzer said that though the industry was waiting for the FIO Report with great anticipation, it is only the first of many more reports the insurance industry should anticipate from FIO.