Steve Dreyer poised to lead FIO as its future reach is disputed on Hill

UPDATE 2 (and 3) February 2019: We’d be remiss if we did not include this Feb. 22, 2019, coverage, via my work for Investment Advisor magazine, noting that longtime deputy Steven Seitz is now officially FIO director after Dreyer stepped down abruptly after five months: https://www.thinkadvisor.com/2019/02/22/seitz-promoted-to-federal-insurance-office-director-post/?slreturn=20190126144207

UPDATE June 14, 2018: Dreyer expected to assume the FIO post Monday, June 18

The Federal Insurance Office at the U.S. Treasury Department will likely have a new director at its helm this summer.

Steve Dreyer, a long-time insurance ratings analyst, will likely step into the position, which has been vacant since January 2017, when the department’s first director stepped down after five and a-half years. Dreyer has been under consideration for months while bureaucratic kinks have been worked out, according to sources. Those obstacles are expected to be cleared soon.

Dreyer, a former managing director for insurance ratings at Standard & Poor’s, subsequently S&P Global Ratings, would have a voice, if not a vote in the Financial Stability Oversight Council, and be instrumental in the Terrorism Risk Insurance Act data collection program.

IMG_3094 Photo courtesy Steve Dreyer

Before retiring last summer, Dreyer had also been active in enterprise risk management and infrastructure risk.

Given his background, Dreyer is interested in predicting and if possible, preventing financial instability in the insurance industry. He wants to know what regulators can do to fulfill this goal, he shared.

One part of this is the development of the international capital standard, or ICS, underway — not just how it is calculated, but how it would be used, according to Dreyer.

Another issue on his radar is the lack of sufficient retirement savings for a many Americans, along with their inability to pay for long-term care insurance costs in particular as a looming crisis for the economy.

While Dreyer acknowledged that this is not strictly an insurance problem, he does see the industry as a central player in it, one that could either exacerbate or ameliorate the problem of long-term care insurance and coverage challenges.  Failure to have the ability to pay for claims would make things worse but the creation of products and processes to help consumers would help, in his view.

As “a student of the insurance industry” for more than 30 years, Dreyer is interested in ways to improve the financial security of Americans who are underinsured or uninsured for risk of flood, earthquake or disability, he stated.

However, as a manager, Dreyer is most proud of the experience he had leading his insurance rating team through the events of  9/11.

He said the event was also an “existential crisis for the industry, as CEOs pondered invoking the war exclusion, and at the same time were looking at losses that were vast and indeterminate at the time.”

Soon after the tragedy struck, Dreyer’s group of analysts had to track down insurance companies for loss estimates while insurers pondered questions on whether to pay enormous potential claims or  face reputational risk. Dreyer and his crew had to meet with colleagues and rating committees with no office and with patchy cell phone service. It took a week to make sure all the analysts were  accounted for, Dreyer said.

Dreyer recounted how his group met in a local pub each day until the offices on Water Street were reopened.

“It is a source of pride to me that we were able to communicate quickly to the market that, in our opinion, the industry WOULD pay claims, they WOULD NOT be bankrupted by doing so, but … could not suffer repeats going forward,” Dreyer emphasized in an email. “I think that it provided some much-needed comfort at the time.

If he assumes the director role, Dreyer would also coordinate closely with counterparts from the Federal Reserve Board, the states and the National Association of Insurance Commissioners on international standards for group capital and the development of other baseline criteria under a global supervisory regime.

He would do so, however, under slightly different statutory conditions than his predecessor, Michael McRaith,  in part due to a new provision in the new Dodd-Frank Act regulatory rollback law.

The recently-signed Economic Growth, Regulatory Relief, and Consumer Protection Act will help shape coordination and consensus between  state regulators and both the Treasury and the Fed.

Although the new law appears to require equal footing among states and federal agencies on the international stage, one law firm has noted that federal powers might prevail. Eversheds Sutherland, in a legal alert dated May 30, noted that the signing statement by President Trump highlighted the executive branch’s constitutional authority “to determine the time, scope and objectives of international negotiations”  in reference to the insurance regulatory provision of the May 24 Act.

In addition, legislation that would curtail some of FIO’s powers is currently brewing in the House Financial Services Committee, although its passage is not a sure thing: the American Council of Life Insurers opposes the modified bill, H.R. 3861, because of its restrictions on “FIO’s structure and scope.”

In a June 5th letter to Rep. Sean Duffy, R-Wis., chairman of the Housing and Insurance Subcommittee, and Rep. Denny Heck, D-Wash.,the ACLI’s CEO Dirk Kempthorne  took aim at the covered agreement language in the bill, provisions that would not allow Treasury/FIO to have the last word over content of the potential language it negotiated with a foreign jurisdiction.

Conversely, the NAIC  supports the bipartisan Federal Insurance Office Reform Act, applauding its requirement for FIO to coordinate more closely with state insurance regulators as well as limiting its power at the international supervisory table.

As director of a post envisioned by the 2010 Dodd-Frank Act, Dreyer would represent the U.S. in international negotiations that could potentially result in another bilateral pact on insurance, known as a covered agreement.

FIO currently has the ability to pre-empt state insurance laws with a covered agreement, which has been a source of tension with parts of the insurance industry and state insurance officials. The European Union and the U.S. reached a pact on reinsurance collateral and other measures in 2017 as part of the first-ever covered agreement.

Under acting director Steve Seitz, FIO and state insurance regulators have been working together recently on a number of initiatives, including reinsurance collateral.  Any future agreements between international jurisdictions and the U.S. FIO and the states have also worked together to consolidate their data collection for terrorism risk insurance information from the property casualty insurance industry.

Treasury did not respond to questions on a FIO director appointment.

Liz Festa, June 6, 2018

 

Update via Investment Advisor magazine: https://www.thinkadvisor.com/2018/11/15/treasurys-federal-insurance-office-director-dreyer/?slreturn=20181015111735

 

 

 

 

 

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