Last week, U.S. Representatives and a group of large insurance companies sent letters to U.S. Treasury Secretary, Timothy Geithner, and other key lawmakers requesting that decisions affecting insurers under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) be postponed until all appointments are made to the newly created Financial Stability Oversight Council (the “Council”).
The Dodd-Frank Act was enacted in July of 2010 to provide for greater financial stability in the overall economy in response to the financial crisis of 2007-2009. Part of the legislation calls for increased oversight of certain large companies whose failure may pose systematic risk to the economy. Aside from large banks and other financial services companies, certain insurers and reinsurers may be large enough or deemed involved in key sectors to merit additional oversight pursuant to the Dodd-Frank Act. The Council, composed of key U.S. financial regulators, will determine the companies subject to such additional oversight based on recommendations from the Federal Reserve.
Pursuant to the Dodd-Frank Act, the Council is comprised of ten voting members and five non-voting members. One of the voting members, an independent insurance expert to be appointed by the Obama administration, has not been filled. In addition, one of the non-voting positions is reserved for the Director of the newly created Federal Insurance Office, who has not been appointed to date. There is one other position on the Council slated for a member with insurance expertise. This non-voting position is reserved for a representative of the National Association of Insurance Commissioner and has been filled by the Director of the Missouri Department of Insurance, John Huff.
The letters from the insurers and certain U.S. Representatives express concerns that two of the three positions on the Council slated for individuals with insurance expertise are empty while the Council is making decisions that will likely affect insurers. The insurers and U.S. Representatives urge that the Council delay decisions affecting insurers until all members of the Council are appointed.
The joint letter of the insurers stated, “The importance of having council members with insurance expertise participate in the council’s deliberations during its formative period cannot be overstated.” In a separate letter, the highest-ranking Democrat on the House Committee on Financial Services (the “Committee”), Rep. Barney Frank, wrote, “It would be a mistake to have important decisions involving the insurance industry made in the absence of those positions being filled.” In another letter, Rep. Frank, U.S. Rep. Spencer Bachus (R.-Ala.), chairman of the Committee, U.S. Rep. Judy Biggert (R.-Ill.), chairman of the Committee’s insurance subcommittee, and U.S. Rep. Luis Gutierrez (D.-Ill.), ranking Democrat on the insurance subcommittee, stated, “The legislative intent in providing for these expert perspectives was to ensure that the Council has a full and thorough understanding of the insurance sector and its current regulatory regime prior to moving forward with any significant actions.”
The insurers also requested that any decisions by the Council with respect to insurers be delayed until the Council determines “qualitative and quantitative standards that it may use to assess insurers, and has provided the insurance industry and the public with an opportunity to comment on such standards.”
For additional information on the Dodd-Frank Act, click here for an article authored by EAPD Attorneys Geoffrey Etherington and Nick Pearson.