On June 13, 2011, Illinois Insurance Commissioner Michael T. McRaith became the first Director of the Federal Insurance Office (FIO). The FIO was created by the Dodd-Frank financial reform legislation, which was instituted last year. Among other things, the FIO is tasked with recommending to the Financial Stability Oversight Council (FSOC) those insurers or reinsurers that should be subject to regulation by the Federal Reserve Board of Governors as nonbank financial companies because they could pose a systemic risk to the stability of the U.S. financial system.
The process for designating these systemically important insurers and reinsurers will be an area of particular concern for Director McRaith (who, as FIO Director, is also a non-voting member of FSOC), as lawmakers on both sides of the aisle are calling on the FSOC to resubmit its January proposed rule that establishes criteria for the designation of nonbank financial companies that could pose a systemic risk. In a May 4, 2011 letter to council members, House Financial Services Oversight and Investigations Subcommittee Chairman Randy Neugebauer (R-Texas) and ranking member Michael Capuano (D-Mass.) argued that the proposed rule is so vague that it deprives affected companies and the public of any opportunity to provide “meaningful comment.”
Director McRaith will also oversee preparation of a report due to Congress in early 2012 on the modernization and improvement of insurance regulation in the U.S. This report could be instrumental in setting the agenda for possible federal regulation of insurance.
The new role ends McRaith’s tenure as Illinois Insurance Commissioner, a position he has held since 2005. Prior to becoming Commissioner, McRaith was an attorney in private practice representing insurers and financial institutions.