The hearing began with opening statements that included expected points. Committee Chairman Sherrod Brown (D-Ohio) intoned the need to maintain policyholder protections and for insurers to remain solvent in the event of catastrophic events that could rattle their capital base, leaving policyholders exposed. In his opening remarks, the ranking member, Sen. Pat Toomey (R-Pa.), defended the state-based insurance regulatory framework, pointed out the dangers of insurers’ allowing social movements to guide their business agenda and highlighted the perils of international bodies imposing solvency regimes at odds with insurers’ sound capital management practice. So far, so good. But sparks began to fly when Sen. Toomey asked Seitz questions which went unanswered, or drew bureaucratic doublespeak responses. A heated exchange between Sen. Toomey and Seitz, in which Sen. Toomey grew visibly irritated, demonstrated Seitz’ frustrating equivocation in explaining FIO’s relationship to the International Association of Insurance Supervisors (IAIS). An excerpt from the exchange below gives a flavor of the tone:
Sen. Toomey: Are you involved in an effort to make recommendations to the IAIS regarding private equity’s involvement in insurance?
Seitz: Umm. As part of our work at the IAIS, we’re closely coordinating the NAIC with the Federal Reserve and the states on a variety of issues, including work relating to the capital standards and the holistic framework which the NAIC is adopting.
Sen. Toomey: You didn’t answer my question. Are you personally involved in research or development of a memo, or an analysis that will include policy recommendations to the IAIS regarding private equity in insurance?
Seitz: You know, our teams are working closely with the NAIC and the states. You know, I am a member of the executive committee, and there are a variety of topics that the IAIS is discussing. And one of those topics at upcoming meetings that we will be discussing is private equity.
Sen. Toomey: You’re obviously trying to evade my question. I don’t know why it’s such a difficult question to answer…
The FIO director’s ambiguity was not reserved for Sen. Toomey. Sen. Mike Rounds (R-S.D.)
indicated it is not prudent for the United States to import capital standards from Europe, and that the FIO should be engaged in protecting the state-based system of insurance regulation. Seitz’ responses remained vague, shedding no light on FIO’s contributions to global solvency regimes being advanced by the IAIS.
What is more, the FIO’s refusal to answer straightforward questions was bipartisan. Sen. Elizabeth Warren (D-Mass.) asked repeatedly if pension risk transfers from life insurance companies to private equity firms result in retiree pension assets being exposed to higher risk of loss of value. Rather than provide a response or share insights, the FIO director replied in multiple hollow versions of “it’s an issue we are monitoring closely.”
The September 8 hearing also provided an opportunity to answer two fundamental questions dogging the FIO since its establishment in 2010. First, does the FIO harbor ambitions to go beyond its scope as a “monitor” and influence insurance regulation at a federal level? Second, is the FIO providing value to insurance policyholders and insurance providers? As revealed in last week’s hearing, the answers to the questions are apparently yes and no, respectively.