By Elizabeth Festa
The Federal Advisory Committee on Insurance (FACI) has gotten its charter renewed for two more years. FACI’s original two-year charter was up Aug. 4. The new charter was renewed until July 29, 2015.
The advisory group, headed by Federal Insurance Office (FIO)
Director Michael McRaith, has met publicly about five times, although records are not complete, and has had many interim phone calls. Its next scheduled open meeting is Sept. 18.
The group has briefed or been briefed on affordability issues, demographics, national flood insurance program challenges, influence of credit rating agencies, responses to Superstorm Sandy and the use of captive vehicles by life insurers to parcel out excess reserves.
For instance, FACI availability and affordability subgroup, headed by consumer representative Birny Birnbaum, urged the FIO to utilize its methodology for analyzing availability and affordability in specific product markets while always analyzing characteristics of race and income in that process. FIO has a statutory charge to monitor the extent to which traditionally underserved communities and consumers, minorities and low-and moderate-income consumers have access to affordable insurance products regarding all lines of insurance, except health insurance.
It wants FIO to use its authority to identify different product markets and consumer segments -- in addition to minority and low- and moderate-income communities and consumers -- which are underserved for various products.
Another group created to look into the practices of the captive insurance industry, chaired by Washington, D.C., Insurance Commissioner William White, briefed FIO on the National Association of Insurance Commissioners (NAIC)
’s work on captives by an NAIC subgroup. It is unclear if FIO is proceeding with its own investigation of captives or letting the NAIC work stand in.
FIO will likely press for more information, given the fact that New York regulators, who are represented on FACI, issued a strong broadside against the captives industry, made public right before the day of the most recent FACI meeting on June 14. They even called for a moratorium on the practices. The NAIC scoffed at that suggestion later that day.
Another FACI group looked at credit rating agencies and concluded that capital management decisions by carriers such as stock buybacks, debt to capital ratios, and dividend yields, as well as rate-making decisions are influenced significantly by the credit rating impacts.
As the inaugural FACI meeting March 30, 2012, McRaith said he hoped FACI would be a forum for discussion. “My hope is to have thoughtful discussion on one or two issues of the day, ... we identify four, five, or six high-level issues this committee feels are important,” he said.
New York Superintendent of Financial Services Benjamin Lawsky said, “There is a risk of biting off more than we can chew and disappearing for two years and coming back with a 1,000-page report.”
There has been no such lengthy report, but at each open meeting there is an awkward allusion to waiting to hear more pointers once the Dodd-Frank-mandated FIO report addressing modernization of the industry is published. McRaith, at the last meeting, said the overdue report would come out sometime this summer, but indications that it would see the light day in the near future have been common since the report was due in late January 2012.
Originally published on LifeHealthPro.com