The National Association of Insurance Commissioners (NAIC) identified the elimination of the Federal Insurance Office (FIO) and the preservation of state control over health insurance regulation among its federal priorities for 2025.
In a letter to congressional leaders, the NAIC said the FIO duplicates regulatory work already performed by state authorities, conflicting with states' established role as primary regulators of insurance markets.
According to the NAIC, the presence of the FIO complicates interactions with international regulators and undermines the separation between the Treasury Department and other financial regulatory entities.
The NAIC also raised concerns about the potential politicization of insurance regulation, noting the Treasury Department was intentionally separated from other financial regulators to avoid such outcomes.
Empowering the FIO with authority to preempt state regulations and directly obtain confidential information from insurers exceeds Treasury’s appropriate functions, according to the NAIC’s communication.
However, the NAIC also acknowledged the value of retaining an insurance expert within the Treasury Department for specific duties, including management of the Terrorism Risk Insurance Program.
The NAIC’s recommendation aligns with recent legislative efforts aimed at closing the FIO. In January, a bill introduced in the US House of Representatives proposed abolishing the office.
The FIO was established in 2010 under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Its primary functions include monitoring the insurance industry, identifying regulatory gaps, and representing the US in international insurance matters.
The FIO operates within the US Department of the Treasury and serves as an advisory body without direct regulatory authority.
In recent years, it has faced criticism from various state insurance regulators and industry stakeholders. Critics contend that state regulators are better equipped to oversee the insurance market and that the FIO's existence leads to unnecessary federal overreach.
Notably, before the Elon Musk-led Department of Government Efficiency (DOGE) officially took off, a coalition of nine state insurance commissioners from Alabama, Arkansas, Kansas, Louisiana, New Hampshire, North Carolina, Oklahoma, Tennessee, and West Virginia issued a joint letter to the agency urging the elimination of the FIO.
Besides the main argument of its redundancy, the coalition said that FIO’s continued operation represents an unnecessary burden on taxpayers.
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