Insurance mostly dodges financial reform

Financial Stability Oversight Council rep
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Financial Stability Oversight Council rep

The new financial reform legislation creates a new position of "state insurance regulator" and gives the person a seat on the Financial Stability Oversight Council, which is charged with detecting systemic risks in the financial services industry.

"There are two nonvoting members on the council -- the (Federal Insurance Office) director and the state regulator -- and there's a third person, a voting member, who is supposed to be an insurance expert," says Zielezienski. "The state insurance regulator will likely be a rotating seat of state regulators."

The theory behind the move is that the state insurance regulator would act as an early-warning detector -- a canary in the coal mine -- to warn of risky behavior in the insurance sector. The question is, how will it work in practice?

"Who knows?" Zielezienski says. "The position is how they're going to define it and how the council views that position."

Impact on consumers: The possibility of additional scrutiny of the insurance industry.




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