Recent legislation, passed by the U.S. Congress and signed into law by President Obama, creates within the Treasury Department a new Federal Insurance Office (FIO) to streamline surplus lines and oversee reinsurance reform.

The legislation is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a landmark reform designed to improve the transparency of the U.S. financial system.

The FIO will monitor the U.S. insurance industry by collecting market information from insurers and identifying regulatory issues that could result in systemic risk failure. It also may recommend regulatory oversight of an insurer by the newly created Financial Services Oversight Council. 

The FIO will also help oversee the government’s terrorism insurance backstop program.

The surplus lines provisions will take effect July 2011. 

"We anticipate that states will be reviewing their regulations to determine if any changes should be made before the provisions take effect,” noted Roger Smith, managing director, Marsh Compliance.  “There are already discussions among various state surplus lines stamping offices and within the National Association of Insurance Commissioners (NAIC) at this month’s NAIC meeting.”

Marsh Compliance will continue to monitor developments, and advise clients accordingly.