Missouri Insurance Director John Huff to U.S. House Subcommittee: Insurers, Consumers Will Be Impacted If Insurance Regulators’ Input Not Leveraged on Financial Stability Oversight Council

Missouri Department of Insurance Director John Huff testified before the U.S. House of Representatives’ Committee on Financial Services Subcommittee on Oversight and Investigations (“Subcommittee”) today, April 14, 2011, about the lack of adequate insurance expertise on the newly created Financial Stability Oversight Council (“FSOC”), on which he serves as the statutory non-voting member.

Title I, Subtitle A of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) established the FSOC, a panel of 15 members (10 voting and five nonvoting) who meet regularly in order to develop the system by which financial institutions are designated “Systemically Important Financial Institutions.”

In his testimony today, Director Huff explained that, pursuant to Dodd-Frank, the FSOC must comprise three insurance-oriented representatives:  a voting member with insurance expertise; the non-voting director of the Federal Insurance Office (“FIO”); and a non-voting state insurance commissioner who is designated through a selection process determined by the state insurance commissioners.  Accordingly, Director Huff was designated to fill the final slot by the National Association of Insurance Commissioners (“NAIC”) in September 2010.

Although the FSOC has begun its official operations and presently engages in work that could impact insurers, Director Huff related, the persons who would fill the remaining two FSOC insurance-related slots are “absent from the table.”  Now-former Illinois Insurance Director Michael McRaith, who recently accepted the appointment as the first FIO Director, will not begin his new job – and thus his term on the Council – until June.  Whomever will fill the third slot has yet to be nominated by President Obama.

Director Huff testified to the Subcommittee that, although the FSOC has been “working at a furious pace,”  he nevertheless has been restricted from consulting with his fellow insurance regulators on insurance-related matters that have, or may come before the FSOC.

“The U.S. Treasury Department has taken a very narrow and, in my opinion and the NAIC’s opinion, incorrect view of the authorizing language in Title I, Subtitle A of the Dodd-Frank Act by claiming that I represent the state of Missouri and not the insurance regulatory system,” Director Huff said.  “Such a position contradicts Congressional intent and the deference accorded to state insurance regulators in the explicit language of the statute itself.  But most importantly, it contradicts logic and reason.”

Director Huff further related that, after repeated requests to the FSOC to allow him to consult with regulators in other states and bring on additional staff resources, and after months of internal discussions with the U.S. Treasury Department on how to leverage available state insurance regulatory resources in relation to his FSOC post, the NAIC sent a public letter to U.S. Treasury Secretary Geithner asking for him to rectify the issue.  According to Director Huff, a reply has not yet been received.

“I am concerned that if progress on this front continues to be made at a similarly slow pace moving forward, decisions that will impact insurance companies, insurance consumers, and the financial stability of the U.S. will be made without adequate advice and counsel from those individuals who know insurance companies best and how such companies are already regulated,” he concluded.

To view Director Huff’s complete testimony and those of other witnesses who testified before the Subcommittee today, click here, or on the hyperlinks below.

• The Honorable Gary Gensler, Chairman, Commodity Futures Trading Commission
• The Honorable Jeffrey A. Goldstein, Under Secretary for Domestic Finance, Department of the Treasury
• The Honorable John Huff, Director, State of Missouri, Department of Insurance, Financial Institutions, and Professional Registration, on behalf of the National Association of Insurance Commissioners
• Ms. J. Nellie Liang, Director, Office of Financial Stability Policy and Research, Federal Reserve
• Mr. Robert W. Cook, Director, Division of Trading and Markets, Securities Exchange Commission
• Mr. Arthur J. Murton, Director, Division of Insurance and Research, Federal Deposit Insurance Corporation
• Mr. Tim Long, Chief National Bank Examiner and Senior Deputy Comptroller for Regulatory Policy, Office of the Comptroller of the Currency

Should you have any questions or comments, please contact Colodny Fass.