The insurance sector is primarily regulated at the state level by individual state agencies. Title V of the Dodd-Frank Act establishes a Federal Insurance Office (FIO) within the Department of the Treasury to promote national coordination in the insurance sector. The FIO has authority over all types of insurance, other than health, long-term care, and crop insurance, but does not have any supervisory role over the business of insurance providers. The supervisory authority of the insurance industry remains with state regulators. Additionally, Title V streamlines the regulation of surplus lines insurance and reinsurance through state-based reforms.
Title V’s main purpose is to promote national coordination in the insurance sector. It is also intended to streamline the regulation of surplus lines insurance and reinsurance through state-based reforms.
Federal Insurance Office
Title V establishes the Federal Insurance Office (FIO) within the Department of the Treasury to monitor all aspects of the insurance industry. See 31 U.S.C. § 313. Specifically, the principal functions of the FIO are as follows:
- identify issues or gaps in the regulation of insurers that could contribute to a systemic crisis in the United States;
- monitor the access to affordable insurance of traditionally underserved communities;
- recommend when insurance companies should be designated as entities subject to regulation as nonbank financial companies supervised by the Federal Reserve Board;
- assist in administering the Terrorist Insurance Program;
- develop federal policy on aspects of international insurance matters;
- represent the United States in the International Association of Insurance Supervisors;
- determine when state insurance actions are preempted; and
- consult with the states regarding insurance matters of national or international importance. See id.
In order to carry out these functions, the FIO has the authority to collect data and information from the insurance industry, and to issue reports on all lines of insurance except health insurance. See 31 U.S.C. § 313(e)(1). Small insurers—those that meet a minimum size threshold established by the FIO—are not required to submit data or information. See 31 U.S.C. § 313(e)(3). Neither the collection of data by the FIO, nor the submission of information to the FIO, waives any privilege to which that data is otherwise subject. See 31 U.S.C. § 313(e)(5). However, any data or information obtained by the FIO may be made available to state insurance regulators through information-sharing agreements. See 31 U.S.C. § 313(e)(5)(C).
None of these provisions limits the authority of any federal financial regulatory agency. See 31 U.S.C. § 313(l). Nor do these provisions limit the authority of the United States Trade Representative over the development and coordination of United States international trade policy. See 31 U.S.C. § 313(m). Additionally, the FIO does not have general supervisory or regulatory authority over the business of insurance; this authority remains with the state regulatory authorities. See 31 U.S.C. § 313(k)
State-Based Insurance Reform
Title V gives the policyholder’s home state sole authority to require the collection of premium tax obligations related to nonadmitted insurance. See 15 U.S.C. § 8201(a). Additionally, the placement of nonadmitted insurance is subject to the laws and regulations of the policyholder’s state. See 15 U.S.C. § 8202(a). Thus, only the policyholder’s home state can require a surplus lines broker to be licensed to sell, solicit, or negotiate nonadmitted insurance with respect to the policyholder. See 15 U.S.C. § 8202(b).
The Act does not allow states to deny credit for reinsurance to an insurer whose state of domicile is an NAIC-accredited state or has solvency requirements that are substantially similar to those required for NAIC accreditation. See 15 U.S.C. § 8221(a). Additionally, the non-domicile states are preempted from:
- restricting or eliminating the rights of the insurer to resolve disputes pursuant to contractual arbitration;
- requiring that a certain state’s laws will govern the reinsurance contract;
- attempting to enforce a reinsurance contract on terms different than those set forth in the reinsurance contract; or
- otherwise applying the laws of the state to reinsurance agreements.
See 15 U.S.C. § 8221(b). Finally, if the reinsurer’s state of domicile is an NAIC-accredited state or has solvency requirements that are substantially similar to those required for NAIC accreditation, then the domicile state is solely responsible for regulating the financial solvency of the reinsurer. See 15 U.S.C. § 8222(a).
The FIO has been established within the Department of the Treasury. The FIO is currently seeking comments on how to modernize and improve insurance regulation.