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Senate Passes Financial Reform Bill Creating Federal Insurance Office


The Senate has passed H.R. 4173, Restoring American Financial Stability Act of 2010, in a 60-39 vote, after having stalled activity on the conference report for more than a week. The legislation is now awaiting signature by President Barack Obama.

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The bill includes augmentation to the current insurance policies, creating a Federal Insurance Office (FIO) with the power to discuss international insurance agreements and the power to monitor the industry from a federal level.

Title VI of the bill outlines the Federal Insurance Act of 2009, which authorizes the Federal Insurance Office to:

•  Monitor the insurance industry,
•  Identify issues or gaps in the regulation of insurers that could contribute to a systemic crisis in the insurance industry or the U.S. financial system,
•  Monitor the extent to which traditionally underserved communities and consumers, minorities, and low- and moderate-income persons have access to affordable insurance products covering all lines of insurance, except health insurance,
•  Recommend to the Financial Services Oversight Council that it designate an insurer as one subject to stricter standards,
•  Assist in administering the Terrorism Insurance Program, and
•  Advise on major domestic and prudential international insurance policy issues.


The bill enlarges the scope of the Federal Insurance Office’s authority regarding all insurance types except health. The bill mandates that the Federal Insurance Office report back to Congress on the modernization and improvement of insurance regulation in the United States. The report to Congress will address the following considerations:

•  Systematic risk regulation with respect to insurance,
•  Capital standards and the relationship between capital allocation and liabilities, including standards relating to liquidity and duration risk,
•  Consumer protection for insurance products and practices, including gaps in state regulation,
•  The degree of national uniformity of state insurance regulation,
•  The regulation of insurance companies and affiliates on a consolidated basis, and
•  International coordination of insurance regulation.


Additional factors to be examined include:

•  The costs and benefits of potential federal regulation of insurance across various lines of insurance (except health),
•  The feasibility of regulating only certain lines of insurance at the federal level, while leaving other lines of insurance to be regulated at the state level,
•  The ability of any potential federal regulation or federal regulators to eliminate or minimize regulatory arbitrage,
•  The impact that developments in the regulation of insurance in foreign jurisdiction might have on the potential federal regulation of insurance,
•  The ability of any potential federal regulation or federal regulator to provide robust consumer protection for policyholders, and
•  The potential consequences of subjecting insurance companies to a federal resolution authority, including the effects of any federal resolution authority.


The study and report will also contain any legislative, administrative or regulatory recommendations, as the director determines appropriate, to carry out or effectuate the findings set forth in such a report.

With respect to the study and report, the FIO director will consult with state insurance regulators, consumer organizations, representatives of the insurance industry and policyholders, and other organizations and experts, as appropriate.

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