Protecting State Insurance Regulation

Defend the State Insurance Regulatory System

PIA strongly supports our thriving, state-based insurance regulatory system and opposes federal laws and regulations that encroach on and thus threaten it. As such, PIA supports the repeal of the Federal Insurance Office (FIO).

PIA supports our successful system of state-based insurance regulation because it has effectively protected consumers for more than a century and has created and cultivated a competitive and diverse U.S. insurance market that has served policyholders’ needs for over 150 years.

The insurance industry is regulated by individual state oversight of members of the insurance industry licensed by each state, rather than by a federal bureaucracy. This structure helps to ensure fairness for consumers by allowing state insurance regulatory authorities to design and refine their system of supervision so that it is tailored to meet the needs of that state’s policyholders. Indeed, according to a report issued by the Government Accountability Office (GAO) in June 2013, the decentralization of our state-based insurance regulatory system helped to mitigate damage to the insurance industry during the 2008 financial crisis.

Repeal or Reform the Federal Insurance Office

In 2010, in a misguided effort to respond to the 2008-2009 financial crisis, advocates of federal insurance regulation created the Federal Insurance Office (FIO) as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (commonly referred to as Dodd-Frank). PIA opposed the creation of the FIO from its inception; its very existence threatens the primacy of state-based insurance regulation. 

Many of FIO’s duties are examples of federal overreach and are duplicative of existing activities within our state-based insurance regulatory system. Additionally, like most federal offices, the FIO’s power has consistently expanded since its creation. In the decade since, the FIO has sought to federally regulate mortgage insurance; to be included in international supervisory colleges; and to promulgate uniform national standards for state guaranty associations. Every one of these acts is well outside the FIO’s mandate. In addition, over the years, it has been identified as a potential overseer of the National Association of Registered Agents and Brokers (NARAB).

The FIO’s authority has continued to expand in recent years. The Biden administration issued a 2021 Executive Order (EO) asking the FIO to assess climate risks to carriers and identify sources of coverage disruption in geographic areas prone to climate change. After the administration issued the EO, the FIO contacted state insurance departments to request zip-code-level data about property insurance coverages, liabilities, and losses. The FIO then announced its intent to conduct a climate-related financial risk data call, among other activities. Additionally, the FIO is using the EO as a pretext to investigate other areas, like flood insurance, which is regulated elsewhere at the federal level and is plainly outside FIO’s mandate.  

In November 2016, PIA became the first national insurance association to publicly call for the repeal of the FIO.  Since then, PIA has been working with members of Congress to develop legislation to repeal or reform it. PIA supports the Federal Insurance Office Elimination Act (S.1694/H.R.2933) introduced by Senator Ted Cruz (R-TX) and Representative Ben Cline (R-VA) and the Insurance Data Protection Act (H.R.5535/S.3349) introduced by Rep. Scott Fitzgerald (R-WI) and Senator Katie Britt (R-AL). 

Federal Insurance Office Elimination Act, H.R. 2933/S. 1694, Sponsored by Rep. Ben Cline (R-VA) and Senator Ted Cruz (R-TX)

The proper place for the regulation of insurance is at the state level, and the state regulation of insurance has served the insurance industry and consumers well for over one hundred years. 

PIA opposed the creation of the FIO from the outset; the best way Congress can protect the state insurance regulatory system and consumers is to fully repeal the FIO by passing the FIO Elimination Act.  

Many of the FIO’s duties are duplicated elsewhere in the federal government and among state insurance commissioners. The FIO’s authority has continued to expand in recent years. The Biden administration issued a 2021 Executive Order (EO) asking the FIO to assess climate risks to carriers and identify sources of coverage disruption in geographic areas prone to climate change. After the administration issued the EO, the FIO contacted state insurance departments to request zip-code-level data about property insurance coverages, liabilities, and losses and the FIO then announced its intent to conduct a climate-related financial risk data call, among other activities. FIO’s work on its data call appears to be ongoing at the time of this hearing. Additionally, the FIO is using the EO as a pretext to investigate other areas, like flood insurance, which is regulated elsewhere at the federal level and is plainly outside FIO’s mandate. 

The FIO Elimination Act would not prohibit the Treasury Department from completing tasks currently assigned to the FIO, like international negotiations and the administration of the Terrorism Risk Insurance Program. However, its passage would greatly reduce the threat of a wholesale federal regulatory takeover of the insurance industry by eliminating an unnecessary federal office that appears to endlessly seek to expand its scope.   

Insurance Data Protection Act, H.R. 5535/S.3349, sponsored by Rep. Scott Fitzgerald (R-WI) and Senator Katie Britt (R-AL) 

The Insurance Data Protection Act would repeal the FIO director’s most powerful tool: its subpoena power and establish confidentiality procedures and disclosure requirements governing the way data could be used by financial regulators. The elimination of the FIO’s subpoena power will help to counteract the FIO’s ever-expanding reach. The bill would also require the FIO to coordinate with state insurance regulators and consult publicly available sources to gather readily available data and limit unnecessary or duplicative efforts. It would also set forth confidentiality procedures and disclosure requirements governing the way financial regulators can use insurance carrier data, once collected. Finally, it would protect consumers by limiting the sharing of non-publicly available data with or by the FIO and other federal agencies and state insurance regulators. This bill would reset the balance of power between the FIO and state insurance regulators. 

The Insurance Data Protection Act, which passed the House Financial Services Committee in April, would be a crucial step toward restoring the primacy of the state regulation of insurance. 

To see the latest blog posts on this issue, click here.

For the most up-to-date information on efforts to repeal the Federal Insurance Office and all our issues, be sure to visit and follow the PIA Advocacy blog, located at www.piaadvocacy.com.