The U.S. Department of the Treasury has released entitled “A Financial System that Creates Economic Opportunities: Asset Management and Insurance,” the third of four reports to be issued by the Department in response to Executive Order 13772 of February 3, 2017, in which President Trump set forth a set of “Core Principles” to be applied by his administration in the regulation of the financial system. The report includes numerous recommendations, including:
- moving away from entity-based system risk evaluations of insurance companies and towards an activities-based approach that would identify business activities that have higher systemic risk characteristics;
- harmonizing the group capital initiative of the NAIC, the states, and the Federal Reserve to reduce the existence of duplicative regulatory burdens for insurers;
- recommending that the International Association of Insurance Supervisors, in developing its Insurance Capital Standard, “recognize the diverse approaches to solvency” by various regulators to ensure that the business model of U.S. insurance companies and the state-based insurance regulatory system of the U.S. are accommodated;
- clarifying, through legislative action, the “business of insurance” exception of Dodd-Frank to ensure that the CFPB is not overseeing activities already regulated by state insurance regulators;
- taking steps to encourage private insurers to participate in the market for terrorism insurance;
- recommending that states adopt the NAIC Insurance Data Security Model Law and, if uniform requirements are not adopted in five years, passing federal legislation setting forth data breach notification standards specific to insurers;
- encouraging the sharing of information within the insurance industry regarding issues related to cybersecurity;
- encouraging the consultation of and participation by state governments when the business of insurance is impacted by the decisions of federal agencies and regulators;
- directing the Federal Insurance Office to advocate for the U.S. state-based insurance regulatory system before the International Association of Insurance Supervisors and recommending that the FIO have a permanent, voting membership on the IAIS Executive Committee.
While some of these recommendations are within the direct power of the executive branch, most will require the cooperation of Congress, state regulators, or other bodies outside of the President’s control, making it an open question how successful President Trump will be in implementing the ideas described in the report.