State vs. Federal, Round Two

He said the purpose of bill is to make sure the FIO is not a regulator, but is merely an information-gathering entity and to make sure it is collected in the most efficient means possible.

The bill would revoke the authority of the FIO and the Office of Financial Research (OFR), two new entities created by the Dodd-Frank Act, to subpoena data from insurance companies.

The bill also would require the FIO, the OFR, the Financial Stability Oversight Council, and any other federal entity that seeks data about insurance companies to obtain that data through the insurance company's state regulator, another federal agency, or a public source.

R.J. Lehmann, deputy director of the Heartland Institute's Center on Finance, Insurance and Real Estate in Washington, was highly critical of the legislation.

He said it is understandable that insurers would want to avoid costly and duplicative data requests, but said DFA already strictly limits the FIO's ability to collect data from insurers, and grants it the power to issue subpoenas only when it cannot gather information any other way.

Lehmann interprets the bill as saying the bill "would leave the office completely beholden to the states and the National Association of Insurance Commissioners for any and all information it might need."

Lehmann said that, "could potentially compromise the office's charge to make recommendations to Congress on ways to improve and modernize the state-based system of insurance regulation."

More troubling, Lehmann said, the bill would place new restrictions on the office's ability to share with other agencies or the general public any "non-publicly available" data that it receives.

He said that while Dodd-Frank already provides protections for confidential information, such as industry trade secrets, "handcuffing the FIO's ability to share even non-confidential data, such as insurers' statutory financial reports, goes against the office's central charge to disseminate information about insurance markets, as well as the requirements of the federal Freedom of Information Act and Dodd-Frank's goal of promoting transparency in financial markets."