An insurance trade group wrote to President Barack Obama objecting that the Financial Stability Oversight Council doesn’t yet include two out of three required representatives with knowledge of the industry.
The Property Casualty Insurers Association of America said the oversight council is at work without the presence of a director of the new Federal Insurance Office and an independent presidential appointee with insurance expertise.
The Dodd-Frank Act’s regulatory overhaul mandated the formation of the Washington-based council and specified its membership would include three people with insurance know-how -- including a state insurance regulator, who has already been named. Only the independent insurance expert will have a vote on the council, and industry groups expressed concern that the group is tackling insurance issues without that vote.
“This important work is being done without the participation of key representatives of the insurance industry,” said David A. Sampson, president and chief executive officer of PCI, in the Jan. 17 letter. He said his group is “extremely concerned” that the panel is already working on “highly important decisions.”
The oversight council, created to prevent future risks to the U.S. financial system, held its third meeting today. Led by Treasury Secretary Timothy F. Geithner, it includes heads of other federal agencies such as the Securities and Exchange Commission, Commodity Futures Trading Commission and Federal Deposit Insurance Corp.
Insurers are concerned the panel is dealing with criteria for non-bank financial companies it would consider systemically important, said Ben McKay, senior vice president for federal government relations at PCI. “They’ve now created a rule that may or may not capture insurance companies, and they’ve done it without having the insurance expert,” he said.
Major insurers have watched the systemic-risk thresholds closely. Industry groups have been arguing against the inclusion of some of their largest members, such as life insurers including MetLife Inc. and Prudential Financial Inc. and property-casualty companies like State Farm Mutual Automobile Insurance Co., Allstate Corp. and Berkshire Hathaway Inc.
“The history over the last few years seems to indicate that many wise policy makers still get confused between insurers and large financial institutions and banking and don’t often understand the unique nature of property-casualty insurance,” said Jimi Grande, senior vice president for federal and political affairs at the National Association of Mutual Insurance Companies, in an interview. “An expert would help us with that.”
In September, Missouri Insurance Director John Huff was chosen to represent state insurance regulators on the council as a non-voting member. The first director of the Federal Insurance Office, created under Dodd-Frank, will be the other non-voting member when he or she is appointed.
Spokesmen for the oversight council and for the White House did not immediately respond to e-mails seeking comment on the appointments.