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November 02, 2009 at 07:00 PM
WASHINGTON BUREAU — When the House Financial Services Committee considers a systemic risk regulation bill Tuesday, it should rewrite the sections governing how much authority federal regulators would have over large, troubled insurers, insurer groups say.
Frank Keating, president of the American Council of Life Insurers, Washington, has written a letter to committee leaders asking them to pare back the “resolution authority” given to federal regulators by the Financial Stability Improvement Act of 2009 “discussion draft.”
Leaders of the American Insurance Association, Washington, and the Property Casualty Insurers Association of America, Des Plaines, Ill., also have asked committee leaders to revise the resolution authority provisions.
Designating insurers as “potentially systemically risky” could weaken policyholder protection rules and programs, insurer group leaders write.
If the draft were implemented as written, policyholders, beneficiaries and other individuals who rely on life insurance payments and proceeds would lose their policyholder claim priority, Keating writes.
Variable life and annuity contract holders would be denied the benefits of separate account insulation, because the kind of receivership or conservatorship envisioned in the discussion draft would treat all creditors the same, Keating writes.
“Traditional life insurance policyholders may lose the benefits of the state insurance guaranty system entirely,” he adds.
The FSIA discussion draft would give the Federal Reserve System, the Federal Deposit Insurance Corp. and a Financial Services Oversight Council broad authority to deal with problems at financial institutions, including non-bank financial institutions such as insurers, that are “too big to fail.”
