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5.2 New Federal Insurance Office

<< Title V Overview

5.2 New Federal Insurance Office

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5.2.       New Federal Insurance Office.  There will be a new Federal Insurance Office within the Treasury.  A Director appointed by the Treasury Secretary will serve as head of the Office.  The Office does not have a regulatory function, but is charged with: (i) monitoring the insurance industry to enhance Federal understanding of insurance issues; (ii) gathering information and making recommendations to Congress about systemic risk and Federal regulation of insurance; (iii) supporting a Federal presence in negotiation of international insurance agreements; and (iv) making judgments about state preemption.  502(a)/§313(c)]

5.2.1.    Functions

5.2.1.1.             Authority.  The Office has authority to conduct a range of monitoring, coordinating, and other activities for all lines of insurance, except health insurance, crop insurance, and long term care insurance that is not included with life or annuity components. [§502(a)/§313(d)]  These activities include, among others, the following: (i) monitoring all aspects of the insurance industry, including identifying 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; (ii) coordinating Federal efforts and developing Federal policy on prudential aspects of international insurance matters; (iii) determining whether state insurance regulations are preempted by international insurance agreements; (iv) consulting with the states regarding insurance matters of national importance and prudential insurance matters of international importance; and (v) recommend to the Oversight Council that it designate an insurer, including affiliates of such insurer, as a Significant Nonbank. [§502(a)/§313(c)(1)]

5.2.1.2.             Advisory Responsibilities.   The Director of the Office will serve in an advisory capacity on the Oversight Council. 502(a)/§313(c)(3)]   The Office will advise the Treasury Secretary on major domestic and prudential international insurance policy issues.502(a)/§313(c)(2)]

5.2.2.    Information Gathering Powers

5.2.2.1.             Information Review and Analysis.  In carrying out its designated functions described above, the Office may: (i) receive and collect data, including financial data, on and from the insurance industry and insurers; (ii) enter into information-sharing agreements; (iii) analyze and disseminate data; and (iv) issue reports regarding all lines of insurance except health insurance.  502(a)/§313(e)(1)]

5.2.2.2.             Information Collection Power.  The Office may require an insurer, or an affiliate of an insurer, to submit such data or information as the Office may reasonably require to carry out its designated functions, but only if the information is not available from other Federal agencies, state regulators, or publicly available sources. [§502(a)/§313(e)(2) and (4)]  Submission of information to the Office will not constitute a waiver of privilege and will be subject to existing confidentiality provisions. [§502(a)/§313(e)(5)(A) and (B)]

5.2.2.3.             Sharing Information with State Regulators.  The Office may provide the information it collects to state insurance regulators through information-sharing agreements, provided that the agreements comply with applicable Federal law and do not constitute a waiver of or affect privilege under Federal or state law.  502(a)/§313(e)(5)(C)]

5.2.2.4.             Subpoena and Enforcement Power.  The Director has subpoena power for production of information, but only if the Director makes a written finding that the information is required to carry out the Office's designated functions and that the Office has exhausted efforts to obtain the information from other agencies and public sources.  502(a)/§313(e)(6)]

5.2.3.    Preemption of State Insurance Measures

5.2.3.1.             Standard and Scope of  Preemption Authority.  The Office has the power to preempt any state insurance regulation or action (state insurance measures) if and to the extent that the Director determines the state insurance measure: (i) results in less favorable treatment of a non-U.S. insurer subject to an international insurance agreement than a U.S. insurer domiciled, licensed, or otherwise admitted in the state; and (ii) is inconsistent with an international insurance agreement (an international insurance agreement is an agreement between the U.S. and one or more foreign governments that provides protections for consumers of insurance and reinsurance that are substantially equivalent to the protections provided under state law).  502(a)/§313(f)(1)]

5.2.3.2.             Procedural Requirements.  Before making a preemption determination, the Director must follow certain prescribed procedures.  The Director must: (i) notify and consult with the relevant state; (ii) notify and consult with the Trade Representative; (iii) publish notice of the issue in the Federal Register; (iv) provide interested parties a written opportunity to submit written comments; and (v) consider comments received.  502(a)/§313(f)(2)]  The Director must establish a reasonable period of time (at least 30 days) before the determination becomes effective and follow certain additional notice procedures once the determination has become effective. [§502(a)/§313(f)(3)]

5.2.3.3.             Effect of Preemption. No state may enforce a state insurance measure to the extent the measure has been preempted under this provision. [§502(a)/§313(f)(4)]

5.2.3.4.             Judicial Review of Preemption.  Determinations of inconsistency with an international insurance agreement will be subject to the Administrative Procedure Act, except that in any action for judicial review of a determination of inconsistency, a federal court will determine the matter de novo.  502(a)/§313(g)]

5.2.4.    Reports to Congress. 

5.2.4.1.             Annual Reports.  The Director must submit annual reports on: (i)  the insurance industry and (ii) preemption, beginning September 30, 2011.  502(a)/§313(n)]

5.2.4.2.             Report on Reinsurance.  The Director must submit to Congress: (i) a report describing the breadth and scope of the global reinsurance market and the critical role such market plays in supporting insurance in the United States by September 12, 2012; and (ii) a report describing the impact of the reinsurance provisions of the Act (described below under "State-Based Reform") on the ability of state regulators to access reinsurance information for regulated companies in their jurisdictions by January 1, 2013 and updated by January 1, 2015.  502(a)/§313(o)]

5.2.5.    Study and Report on Regulation of Insurance

5.2.5.1.             Scope and Timing of Report.  Within 18 months of enactment of the Act, the Director must conduct a study and submit a report on how to modernize and improve insurance regulation in the United States. [§502(a)/§313(p)(1)]  The study and report is to be guided by the following considerations: (i) effective systemic risk regulation; (ii) capital standards and the relationship between capital allocation and liabilities, including standards relating to liquidity and duration risk; (iii) consumer protection for insurance products and practices, including gaps in state regulation; (iv) the degree of national uniformity of state insurance regulation; (v) the regulation of insurance companies and affiliates on a consolidated basis; and (vi) international coordination of insurance regulation.  502(a)/§313(p)(2)]  The Director must consult with state insurance regulators, consumer organizations, representatives of the insurance industry and policyholders, and other organizations and experts as appropriate.  502(a)/§313(p)(5)]

5.2.5.2.             Special Focus on Potential Federal Regulation of Insurance.  The study and report must also examine a range of specified factors relating to the potential Federal regulation of the insurance industry.  These include, among others, the costs and benefits of potential Federal regulation of insurance across various lines of insurance (except health insurance), the ability of potential Federal regulation to provide robust consumer protection for policyholders, and the potential consequences of subjecting insurance companies to a Federal resolution authority.  502(a)/§313(p)(3)]

5.2.5.3.             Required Recommendations.  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 the report.  502(a)/§313(p)(4)]

5.2.6.    General Provisions

5.2.6.1.             Rulemaking Authority of the Treasury Secretary.  The Treasury Secretary (not the Office) has authority to issue orders, regulations, policies, and procedures to implement this section.  502(a)/§313(h)]

5.2.6.2.             Savings Provisions.  The Act will not: (i) preempt any state insurance measure governing any insurer's rates, premiums, underwriting, or sales practices, state insurance coverage requirements, the application of any state antitrust laws to the business of insurance, or any state insurance measure governing the capital or solvency of an insurer, except to the extent the state insurance measure results in less favorable treatment of a non-U.S. insurer than a U.S. insurer; (ii) affect any provision of the Consumer Financial Protection Agency Act of 2010; or (iii) affect the preemption of any state insurance measure otherwise inconsistent with and preempted by Federal law.  502(a)/§313(j)]

5.2.6.3.             Retention of Existing State Regulatory Authority.  The Act does not establish or provide the Office or Treasury with general supervisory or regulatory authority over the business of insurance.  502(a)/§313(k)]

5.2.6.4.             Retention of Authority of Federal Financial Regulatory Agencies.  The Act does not limit the authority of any Federal financial regulatory agency, including the authority to develop and coordinate policy, negotiate, and enter into agreements with foreign governments, authorities, regulators, and multinational committees and to preempt state measures to affect uniformity with international regulatory agreements.  502(a)/§313(l)]