McRaith a Favorable FIO Director Choice for Insurers

While the U.S. Treasury Department is yet to make a formal announcement, various sources express confidence that Michael McRaith will be the first Director of the Federal Insurance Office – the federal body mandated by the Dodd-Frank financial services reform legislation. McRaith, who is currently head of the Illinois Department of Insurance, is a favorable choice from the perspective of the insurance industry.

Insurance industry associations have long been divided as to whether some kind of federal regulation of insurance was desirable or not, but McRaith has attributes that are likely to please parties on either side of the debate. As I have reported in my commentary on Title V of Dodd-Frank, the FIO was designed to be a strictly informational or monitoring agency. However, opponents of federal insurance regulation feared that a first Director of the FIO enthusiastic about federal regulation of insurance could shape the agency into something that exceeded its original mandate. McRaith does not present that threat.

“As someone drawn from the collegial ranks of insurance regulators, McRaith will be as positively accepted by the insurance industry as one could hope,” comments Clark Troy, a New Jersey-based analyst with Aite Group. “There isn’t overwhelming enthusiasm for the FIO across the insurance industry, so I think a ‘politic’ appointment is wise.”

Even proponents of federal insurance regulation would appreciate McRaith’s understanding of the insurance industry and the state regulatory system, as it will make him better equipped to represent both the merits of the existing state-based regime and also the legitimate concerns of insurance companies.

His appointment would also fill the second of two insurance seats designated for the 15-member Financial Stability Oversight Council (FSOC), a body also created by Dodd-Frank in order to identify threats to the stability of the U.S. financial system. There have been reports of friction between the current lone FSOC insurance representative, John Huff, Director of the Missouri Department of Insurance, and other members of the Council.

“FSOC has already brought criteria whereby insurers would be supposed to pose systemic to the financial system, though the insurance industry position is that no insurer poses systemic risk,” comments Howard Mills, chief adviser of Deloitte’s (New York) Insurance Industry Group. “Huff has tried to bring forward NAIC [National Association of Insurance Commissioners] resources.”

Mills, himself former Superintendent of Insurance for New York, and personally acquainted with McRaith as a state regulator peer, believes the presence of another state regulator will help to smooth the waters within FSOC. “I’m assuming that he will use his knowledge of the state regulatory system to forge a more cooperative relationship between the federal and state regulators,” Mills comments.

Among insurance industry associations, the American Council of Life Insurers (ACLI) declined to comment in advance of formal notice of McRaith's appointment, and the Property Casualty Insurers Association of America didn't return a phone call. However, the National Association of Mutual Insurance Companies has reacted favorably to news of McRaith's appointment.

"As he takes control at FIO, we believe Commissioner McRaith’s experience will keep him focused on its limited mandate to provide information on the insurance industry to policymakers and coordinate on international issues," comments Jimi Grande, senior VP, federal and political affairs, NAMIC. "As a former state regulator, he knows the importance of the state regulatory system, and that the FIO was created with the explicit intent of not duplicating the work of state regulators."

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio