Data call the answer
Treasury Secretary Janet Yellen appearing before the House Financial Services Committee, February 6, 2024
This week a hearing was held in both the U.S. House Financial Services Committee and the U.S. Senate Committee on Banking, Housing, and Urban Affairs to discuss key insurance issues and lawmakers’ oversight of the Financial Stability Oversight Council (FSOC). The only witness called in both hearings was Treasury Secretary Janet Yellen, FSOC Chair, who shared the financial risks observed this past year in an attempt to maintain confidence in the banking system. The Council’s 2023 annual report also included areas that need further work, including combatting loss from climate change in the insurance industry and consolidating data collection efforts between state and federal regulators. Yellen answered many questions in the hearings, helping the committee to better understand the FSOC report and threats she sees to the financial stability of the U.S. property & casualty insurance market.
Many lines of questioning were focused on affordability and accessibility of homeowners insurance, with lawmakers specifically asking Yellen how Treasury was working with the National Association of Insurance Commissioners (NAIC) to remedy the issue. Yellen responded that the Treasury was currently improving its understanding of climate change impact on those two factors. She said this includes the Fed’s nationwide property insurance data call that the US Treasury has been pushing the NAIC on through its Federal Insurance Office (FIO). A new data collection template was approved for use by the FIO to compare insurance premiums against different zip codes across the U.S.
Lawmakers were further concerned with the lack of coordination between state and federal regulators, to which Secretary Yellen replied that the FIO was currently talking to state regulators, so there was an expectation that the data could all be condensed into a single request. Doing so, she said, would ease the compliance burdens on small insurance companies.
Secretary Yellen delivered the same 5-minute testimony to the Senate Committee on Banking, Housing, and Urban Affairs two days later, which included a focus on climate impact in the banking and insurance spaces. Yellen talked about the necessity of enhancing assessment efforts and increasing coordination between all actors in the industry, both at the state and federal levels. Secretary Yellen said the FSOC continues to be concerned and pursue answers on how rising property insurance prices impact market stability, which she noted has implications on banks as well due to uninsured losses. Other recent congressional ideas on these topics include establishing a federal reinsurance fund for insurance companies.
LMA Newsletter of 2-12-24
