Baribeau

Question 1

Dodd-Frank Act created which 2 entities?

Answer 1

Federal Insurance Office (FIO):
* monitors insurance industry
* identifies gaps in the state-based regulatory system

Financial Stability Oversight Council (FSOC):
* monitors all financial services markets (including insurance)
* identifies risks to financial stability

Question 2

Dodd-Frank has authority to regulate 2 types of insurers

Answer 2

• SIFIs (Systematically Important Financial Institutions)
• insurance holding companies that own banks

Question 3

Dodd-Frank requirements

Answer 3

UMAD
* Undergo stress-testing (to assess whether an insurer can absorb the financial impact of adverse events)
* Meet liquidity requirements (for short-term obligations)
* Adhere to capital requirements (for all obligations)
* Develop a living will (a resolution plan in the event of insolvency)

Question 4

Areas of responsibility of the FIO

Answer 4

CRITI
* Collect data on the insurance industry
* Report annually to Congress on the state of the insurance industry
* Improvements (suggest improvements to insurance regulation in conjunction with state insurance departments)
* TRIA (help administer TRIA)
* International (help with negotiation of international agreements)

Question 5

Actuarial concerns regarding FIO

Answer 5

BCDS
Banking regulation spillover
* increases compliance costs for insurers that have banks within their structure

Capital requirements
* inappropriate increases in capital requirements (stricter capital requirements should apply more to banks than insurers)

Dual regulation
* inconsistent regulation between state & federal (accounting/solvency standards)
* excessive regulation (federal regulation on top of state regulation may be expensive and restrictive)

Standardization
* forced standardization of forms & rates decreases innovation and competition

Question 6

International concerns regarding FIO

Answer 6

FCS
Federal approach:
* better for international coordination of standards (versus many different state-based approaches)
* worse for transparency (FIO is not as transparent as NAIC)

Conflict between NAIC & FIO:
* NAIC and states have traditionally been at the forefront of international insurance issues
* FIO is now participating at the federal level and may have different approaches

Standardization of insurance:
* this was listed as an actuarial concern but also applies internationally
* may decrease innovation, reduce consumer options, increase costs

Question 7

Restrictions on authority of FIO

Answer 7

Cannot preempt state regulation of:
* rates
* UW
* coverage requirements
* sales practices
* capital requirements

Except if state requirements result in less favorable treatment of a non-US insurer versus a US insurer.