Federal Insurance Office (FIO) Director Michael McRaith announced during the Federal Advisory Committee on Insurance (FACI) meeting last week that the FACI is expected to issue its recommendations on retirement security, capital standards, and cybersecurity by the next FACI meeting in May.
During the February 10th meeting, FACI members heard presentations regarding the financial uncertainty many Americans face due to retirement insecurity. Bruce Saul, senior policy advisor for the FIO, highlighted the financial pressures that federal retirement programs will confront as the baby boomer generation moves into retirement, greatly expanding the number of people utilizing the programs in proportion to those working. He noted citizens’ increasing lifespans and inability to determine the amount needed for support after retirement, coupled with the high number of retirees, will create a huge strain on programs such as Social Security and Medicare. In an attempt to alleviate these concerns, the Treasury Department introduced myRA, short for “my Retirement Account.” The program is designed to offer those without access to employer-sponsored retirement plans a more effective way to save for retirement backed by the US Treasury, and is designed so there is no cost to participants.
Concerns were voiced that the insurance industry’s historical promotion of variable annuities may be a potential issue in the future. Birny Birnbaum, the executive director of the Center for Economic Justice, expressed concern that the high fees being charged by the industry for these variable annuities may cause problems, because they may not offer the value that consumers need. However, the American Council of Life Insurers Vice President Alane Dent noted that the industry has a number of options on the market and that it is the task of insurance agents and brokers to guide consumers towards the right choice for them. McRaith noted that it is crucial for regulators to ensure that, as federal and international capital standards go into effect in the coming years, they do not pressure life insurers to charge higher amounts for their products, which could aggravate the already worrisome issue.
Cybersecurity was also addressed at last week’s meeting, which came in the wake of a highly publicized cyber security breach earlier this month experienced by Anthem Inc. Sarah Bloom Raskin, Deputy Treasury Secretary, noted that cyber security is of utmost importance to CEO’s and corporate boards and that the Treasury has been working to find ways to bring federal and state governments together with industry officials to address the issues. She highlighted security risks posed by service providers brought in to work for financial institutions and discussed potential ways to address that concern.
The FIO recommendations to be issued in May will be closely scrutinized by the insurance industry and given the FIO’s role in influencing international regulation, its position on capital standards will be especially significant.