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Thursday, August 29, 2013

Financial Stability Board Sees Need for Increased Federal Regulation of Insurance

ABIA has long supported modernizing the current state-based regulatory system for insurers, including support for S. 534, the National Association of Registered Agents and Brokers Reform Act of 2013 (NARAB II). Modernizing insurance regulation has garnered more support with the release of the Financial Stability Board (FSB) report yesterday.

The report finds that that "architecture for insurance supervision in the US, characterized by the multiplicity of state regulators, the absence of federal regulatory powers to promote greater regulatory uniformity and the limited rights to preempt state law, constrains the ability of the US to ensure regulatory uniformity in the insurance sector. Given the drawbacks of the current regulatory set-up, the US authorities should consider whether migration towards a more federal and streamlined structure may be a more effective means of achieving greater regulatory uniformity." 

The report offers three recommendations "to enhance the effectiveness of insurance supervision,":
  1. That the Federal Insurance Office (FIO) enhance its monitoring of the insurance sector and be given authority to address regulatory issues and gaps;
  2. Require consolidated financial reporting for all insurance groups; and 
  3. Implement changes to the "terms of state commissioners’ appointments, the rulemaking powers of state insurance departments, and their funding and staffing to bolster specialist skills."
FSB Press Release.

Read the report.