Federal Insurance Chief McRaith Leaving Post on Jan. 20

January 6, 2017

Michael McRaith, who has served as director the Federal Insurance Office since its creation in 2011, is resigning his post as of Jan. 20. as the Trump Administration begins.

McRaith announced his plan to leave the agency during a Jan. 4 meeting of an FIO advisory panel.

McRaith, a former director of the Illinois insurance department, was named to the FIO post by President Obama in March 2011.

The FIO was created by 2010’s Dodd-Frank Act. The federal agency has authority to monitor insurance markets and insurance regulation but has no regulatory power itself; that remains with the states as it has since 1945 when Congress passed the McCarran-Ferguson Act exempting insurance from most federal regulation.

The FIO operates from within the U.S. Department of Treasury and is charged with advising Congress on insurance markets, helping to lead U.S. efforts on international insurance issues, and advising various federal entities on insurers’ systemic risk exposure.

Michael McRaith
Federal Insurance Office

In 2013, the FIO released a report on ways to modernize insurance regulation. The report concluded that in some circumstances, policy goals of uniformity, efficiency, and consumer protection make continued federal involvement necessary to improve insurance regulation. However, insurance regulation in the United States is best left to a hybrid model, where both state and federal regulatory bodies play complementary roles, the report found.

In perhaps its most controversial action, McRaith’s office was involved the creation of an auto insurance affordability index intended to guide policymakers in determining if traditionally underserved consumers, minorities, and low- and moderate-income persons have access to affordable insurance products. According to the index released in July, if the average auto insurance liability premium paid by consumers in minority and low-income neighborhoods is more than 2 percent of the median income in those neighborhoods, the auto insurance will be considered unaffordable. The FIO planned to report annually on affordability using the index.

Some insurers and other financial firms have criticized the numerical index, arguing it is too simplistic to truly measure affordability. Insurers expressed concern over how the public and policymakers may interpret FIO’s reporting on the index in the future.

The FIO has also been involved in monitoring and reporting on the Terrorism Risk Insurance Program (TRIP). It issued a report in 2016 concluding that the program works while recommending some changes to move toward a more private market. Last year it began requesting that insurers voluntarily submit insurance data regarding their participation in the program. Reporting is slated to become mandatory in 2017. It also named a panel to explore ways to encourage more private insurers to offer terrorism insurance.

The FIO has supported the continuing negotiations between the United States and European Commission over a covered re/insurance agreement. McRaith and some U.S. insurers want assurances that the EU will treat U.S. insurers fairly and recognize the U.S. regulatory scheme. The FIO participates in the International Insurance Society.

The FIO came in for criticism from insurance brokers for its slowness in naming board members to the new insurance producer licensing panel known as the National Association of Registered Agents and Brokers (NARAB). The system is for producers who are licensed in their home states who wish to become a member of a national nonprofit registry to more easily become approved to do business in other states.

In his remarks announcing his resignation, McRaith defend the federal agency from critics who say it is a threat to state regulation.

“We are not here to take from the states what McCarran-Ferguson has given to them,” he said. “But we are here to serve the national interest.”

He said it is important for the country to be able to talk about insurance issues at the national level, citing long term care and retirement as two, and to talk about the way the industry is regulated, for the benefit of the industry as well as for consumers.

President-elect Donald Trump has nominated Steven T. Mnuchin, a Goldman Sachs trader and bank chief executive, to succeed Jack Lew as he next Treasury secretary.

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