The Banking, Housing and Urban Affairs Committee’s Sept. So, Federal Insurance Office 8 hearing on current issues in the insurance industry included. A useful discussion of some of the industry’s most pressing issues. Comments from committee members and one witness, Maryland Insurance Commissioner Kathleen Birrane. Clarified insurance for cyber and pandemic events. The impact of private equity firms acquiring pension liabilities from life insurers (pension risk transfer). And pressures on the United States to conform to global regulatory regimes that impact the capital standards of US insurers. The hearing was also marked by profound evasiveness from the second witness, Federal Insurance Office (FIO) Director Steven Seitz.
Federal Insurance Office: Hearing
The hearing began with opening statements that covered the expected points. Committee Chairman Sherrod Brown (D-Ohio) said the need to preserve policyholder protections. And also ensure that insurers remain solvent in the event of catastrophic events. So, that could shake their capital base and expose policyholders.
Also, in his opening remarks, ranking member Sen. Pat Toomey (R-Pa.) defended the state’s insurance regulatory framework, pointed to the dangers of insurers allowing social movements to drive their business agenda and highlighted the dangers of international bodies imposing solvency regimes contrary to good practice of insurers in capital management. So far so good. But sparks began to fly when Sen. Toomey asked Seitz questions that went unanswered or drew bureaucratic bilingual responses. A heated exchange between Senator Toomey and Seitz, in which Senator Toomey was visibly irritated, demonstrated Seitz’s frustrating lack of clarity in explaining the FIO’s relationship with the International Association of Insurance Supervisors (IAIS).
An excerpt of the exchange below gives a flavour of the tone:
Dream. Toomey: Are you there in trying to make recommendations to the IAIS on private equity involvement in insurance?
Seitz: Umm. As part of our work at IAIS, we coordinate closely between the NAIC and the Federal Reserve System and the states on a variety of issues, including work related to capital standards and the holistic framework that the NAIC adopts.
Senator Toomey: You didn’t answer my question. Are you personally there in the research or development of a memorandum? Or analysis that will include policy recommendations for the IAIS regarding private equity in the insurance industry?
Seitz: You know, our teams work closely with the NAIC and the states. You know, I am a member of the executive committee and the IAIS discusses various topics. And one of the topics in the upcoming meetings that we will discuss is private equity.
Senator Toomey: You are trying to avoid my question. I don’t know why the question is so hard to answer…
The ambiguity of the FIO director was not reserved for Senator Toomey. Sen. Mike Rounds (R-S.D.) Read more: Car Insurance Fuquay Varina NC All details
stated that it was not prudent for the United States to import capital standards from Europe and that the FIO should be involved in protecting the state’s system of insurance regulation. Seitz’s answers remained vague and shed no light on the FIO’s contributions to the global solvency regimes promoted by the IAIS.
What’s more, the FIO’s refusal to answer simple questions was bipartisan. Sen. Elizabeth Warren (D-Mass.) has repeatedly questioned whether transfers of pension risk. So, from life insurance companies to private equity firms put retirees’ assets at greater risk of losing value. Instead of providing an answer or sharing insights. So, the FIO director responded in several blank versions “it’s an issue we’re following closely.”
The Sept. 8 hearing also provided an opportunity to answer two critical questions. So, that has plagued the FIO since its inception in 2010. First, does the FIO have ambitions to move beyond its role as a “monitor”? So, to influence insurance regulation at the federal level? Second, does FIO provide value to policyholders and insurance providers? As revealed in last week’s hearing, the answers to the questions are yes and no. So, For example, ambulances are not part of the legislation.