Eliminating the Federal Insurance Office: A Legislative Proposal

A New Push to Eliminate the Federal Insurance Office: What It Could Mean for Carriers, Regulators, and the State Based System

A familiar debate is back on the front burner in Washington: who should hold the steering wheel on insurance oversight?

A legislative proposal called the McCarran-Ferguson Restoration Act, introduced by Rep. Troy Downing (R Montana), would abolish the Federal Insurance Office (FIO) and reinforce the long-standing position that insurance regulation belongs primarily with the states. The push is drawing vocal support from state insurance commissioners and major trade groups, and it is already reshaping the conversation about federal involvement in everything from data calls to international representation. (Representative Troy Downing)

At stake is not just an organizational chart at Treasury. For the industry, the outcome could influence regulatory duplication, market monitoring, how climate and catastrophe data is gathered, and how the U.S. presents a unified position abroad.

Why This Bill, Why Now

The state based model is not new. It is the foundation of U.S. insurance regulation dating to the McCarran-Ferguson Act of 1945, which preserved state authority after the Supreme Court opened the door to federal oversight of insurance commerce.

What is new is the renewed momentum to unwind what many in the industry see as a federal expansion that started with Dodd-Frank. The FIO was created in 2010 within the U.S. Treasury Department. It was designed to monitor the insurance sector, coordinate certain federal programs, and represent the U.S. in international insurance matters.

Critics have argued that FIO has steadily moved beyond a monitoring and advisory posture, particularly through data collection and market reports that, in their view, replicate state regulator work and create new compliance burdens.

What the McCarran-Ferguson Restoration Act Would Actually Do

The bill’s core action is simple: it eliminates FIO. But it also tries to answer an immediate follow-up question: if Treasury still needs insurance expertise for federal programs and international engagement, where does that live?

The proposal would create a new position, U.S. Insurance Representative, appointed by the Treasury Secretary. That role would handle international insurance matters and support administration of the federal terrorism insurance program, functions supporters say are legitimate federal needs without giving Treasury a broader domestic footprint.

One key detail has generated attention inside regulatory circles: the bill includes changes tied to representation at the Financial Stability Oversight Council (FSOC). Different summaries of the proposal emphasize slightly different approaches to FSOC participation, which underscores how sensitive the issue is. What is clear is that supporters want a stronger, more formalized state system voice in federal systemic risk discussions.

“State insurance regulators strongly support Rep. Downing’s legislation to abolish the Federal Insurance Office and reaffirm the states’ role as the primary insurance regulators in the United States.”
Scott A. White, Virginia Insurance Commissioner and NAIC President

The Case for Elimination: Industry and Regulator Arguments

Supporters are making three main points.

First, they argue that state regulators are already built for the job. State insurance departments license carriers and producers, oversee solvency, review rates in many lines, and enforce market conduct. In that view, FIO adds another set of expectations without adding a corresponding enforcement role or accountability structure.

Second, they contend that duplication is not abstract. It becomes real in the form of data calls, reporting cycles, and compliance overhead that ultimately shows up in cost structures.

Third, they say the U.S. can still show up internationally without an office that can be perceived as a parallel domestic regulator.

“The McCarran-Ferguson Restoration Act is a critical measure to preserve the strength of our state-based system of insurance regulation, a framework that has protected consumers and ensured market stability for decades.”
Sam Whitfield, Senior Vice President, Federal Government Relations and Political Engagement, APCIA

The Flashpoint: Data Calls and the Homeowners Market Narrative

If you want to understand why emotions run high, look at the recent argument over homeowners insurance data and climate driven availability.

FIO’s homeowners insurance analysis and related discussion prompted sharp rebuttals from industry groups. A recurring criticism is that some federal reports lean on incomplete datasets or frame nonrenewals and affordability without fully accounting for the underlying insurance fundamentals of rate adequacy, reinsurance pricing, loss trend, and mitigation.

“The latest FIO analysis is a flawed and failed attempt at adding something to the conversation.”
Jimi Grande, Senior Vice President, Federal and Political Affairs, NAMIC

For carriers, this matters because federal narratives can influence expectations across the ecosystem, including legislative proposals, regulatory posture, consumer perception, and even litigation strategies. For agents, it can shape how clients interpret premium movement and underwriting tightening.

One Table to Frame the Real Question

Here is the practical way many insurance executives are thinking about the choice.

This is why the bill resonates. It is not a philosophical argument in a vacuum. It is a debate about which approach is more efficient and who owns accountability.

What Insurance Leaders Should Watch Next

This proposal still has legislative hurdles, and the outcome will depend on committee action, coalition strength, and how lawmakers weigh systemic risk concerns against the industry’s call for streamlined oversight.

In the near term, three signals will matter most.

The key signals

• How FSOC participation is ultimately structured in the legislative text and committee markups

• Whether bipartisan support emerges, especially among members focused on financial stability frameworks

• How Treasury and federal policymakers respond on the need for centralized insurance monitoring and data collection

The Bottom Line

For the insurance industry, the debate over FIO is really a debate about operating model.

Supporters see a cleaner lane for Treasury, a stronger reaffirmation of state authority, and fewer overlapping compliance demands. Critics, where they exist, worry about losing a federal vantage point for systemic risk and a centralized international voice.

Either way, the conversation is no longer theoretical. The legislation is on the table, major trade groups are mobilized, and state regulators are leaning in. If you run a carrier, lead a distribution organization, or manage compliance, this is a policy fight worth tracking closely because it reaches directly into how insurance is governed, how it is portrayed, and how efficiently the system can respond when markets are under stress.