National Underwriter - April 18 2011

FSOC Insurance Member Criticizes
Handling Of Industry Interests

BY ARTHUR D. POSTAL

THE INSURANCE industry’s interests on the Financial Stability Oversight Coun- cil (FSOC) are “inadequately represented” because of the council’s policies, the National Association of Insurance Commissioners (NAIC) told a congressional panel.

The Treasury Department has taken “a very narrow and, in my opinion and the NAIC’s opinion, incorrect view” of the provision establishing the FSOC in the Dodd-Frank law, John Huff, director of insurance in Missouri and a non-voting member of the FSOC, said in testimony before the Oversight and Investigations Subcommittee of the House Financial Services Committee.

Specifically, he said he has been restricted from consulting with his fellow state insurance regulators on matters before the FSOC. He contended that the restrictions contradict “congressional intent and the deference accorded to state insurance regulators in the explicit language” of Dodd-Frank itself.

“Quite simply, FSOC should want—and the U.S. taxpayers should demand—all the regulatory resources and expertise that their regulators can provide to FSOC’s important work in protecting the U.S. financial system,” he said.

He said the issue is so important that he and Terri Vaughan, NAIC CEO, “sent a public letter to [Treasury Secretary Timothy Geithner] asking for him to rectify this issue.” He said the NAIC has yet to receive a written reply, but that some accommodations have been made to date, although he declined to disclose what they were.

Rep. Randy Neugebauer, R-Texas, chairman of the oversight panel, charged at the hearing that the FSOC is proceeding to designate certain nonbank financial firms as “systemically important” without any representative at the federal level “who truly understands the business of insurance.” Neugebauer added, “On top of that, Director John Huff, who is the only insurance

� FSOC RESTRICTIONS BARRING consultation with his fellow state insurance regulators leave Missouri Insurance Director John Huff (a non-voting member) and the insurance industry without adequate representation.

expert [non-voting] currently participating
on the FSOC, has publicly declared his
frustration with his ability to meaning-
fully participate and provide the regulatory
perspective of the insurance sector in these
critical discussions.”
Neugebauer said Huff has “even offered
additional NAIC staff to support the work
of FSOC at no additional cost to the U.S.
taxpayers. Unfortunately, his complaints
and generous offer have been ignored by
the chairman of the council [Geithner].”
Matt Brady, a spokesman for the Nation-
al Association of Mutual Insurance Cos.,
commenting on Huff’s testimony, says,
“We share Commissioner Huff’s concern
that important decisions are being made by
the FSOC without a sufficient understand-
ing of the insurance industry.”
“In creating the FSOC, Congress clear-
ly intended for someone with a thorough
understanding of those differences to
have a voice, and a vote, in the FSOC’s
decision-making.” NU

Cat Bonds Set 1Q Record

BY MARK E. RUQUET

THE VALUE OF insurance-linked-se- curities (ILS) placements increased by more than half in the 2011 first quarter as four insurers placed more than $1 billion in bonds in the market, according to a report from Willis Group.

In its “ILS Market Update, Q1 2011: The Market Digests a Major Catastrophe Event” report, Willis Capital Markets & Advisory says there was a record $1.015 billion of ILS placed in the market compared to $650 million for the same period last year—in a quarter traditionally seen as “relatively quiet” for such placements.