The Dodd-Frank Act

Up until 2010 each state regulated their own insurance practices. The National Association of Insurance Commissioners (NAIC) have worked with each state to help with state-wide insurance regulation as well. After the 2008 financial collapse, the government began the process of creating a checks and balances system to avoid any further economic disaster. Title V of the Dodd-Frank Act (2010) created the “Federal Insurance Office” (FIO). This signifies the first time the federal government (U.S Treasury) officially recognizes an entity of its own to help regulate the insurance industry. The NAIC since then works alongside the FIO to help implement a better insurance infrastructure. Alongside the creation of the FIO was the creation of Title I of The Dodd-Frank Act. This implemented the “Financial Stability Oversight Council” (FSCO) whose purpose of this entity is to oversee all risk associated in the financial system and manage or minimize the potential risk, within but not limited to the insurance industry. Title I indicates that the Federal Government can enact special Federal regulation to any insurance company they think might “pose a threat to the financial stability of The United States”.

Financial risk became a major concern after the 2008 financial collapse. With Title I of The Dodd-Frank act in place, the Federal Government is now able to conduct formal investigations, that can lead to federal regulation of any insurance business deemed worthy. AIG, Prudential, and MetLife have become synonymous with Title I and have become familiar with The Federal Governments attempted involvement with their insurance practices. Moreso, with MetLife due to FSCO’s recent designation of them being an institution that could potentially “disrupt the economic system”. It was fiercely disputed, and eventually, MetLife sought judicial review. After the investigation, MetLife was found to be correctly adhering to best practices associated with their financial status. This dispute with one of the largest global insurance companies proved how difficult it can be to reform old practices and that the “Too big to fail” mindset can be empowering but that great care must transpire in order for the benefit to be apparent. Checks and balances are crucial to the strengthening of our economy. The Dodd-Frank act is enabling the FSCO to actively provide the check’s and balances necessary, while also maintaining a responsive attitude towards the changing economic climate.

Insurance companies will not be regulated by the newly created Federal Insurance Office, per say. Instead, the FIO will be monitoring the insurance practices of each state, to help Congress adopt better perspectives about the insurance industry while also making recommendations to help the bettering of insurance laws and regulations. The director of the office works in tandem with the Oversight Council to help improve the current practices within the insurance and economic markets. This trifecta of the NAIC, FIO, and each state insurance commissioner will help provide the government with enough information to help aid in the national and global insurance and economic structure. Mitigating risk of another economic collapse is the immediate goal of these acts. The cooperation from all involved will allow this to be ensured.