WASHINGTON BUREAU — Insurance groups have problems with the systemic risk oversight section of the Financial Stability Improvement Act of 2009 draft.
The House Financial Services Committee is in the process of marking up the FSIA draft.
The systemic risk provisions would give federal regulators authority to oversee insurance holding companies if they believe problems at those companies could threaten the stability of the financial system.
The FSIA draft would give the Federal System, the Federal Deposit Insurance Corp. and a council of federal regulators broad authority to deal with so-called “too big to fail” financial institutions, including non-banks such as insurers.
The draft would give a proposed Financial Services Oversight Council authority to designate “financial companies” – which expressly include U.S. and foreign non-bank financial institutions such as insurers – for heightened prudential regulation.
FSIA would not give the FSOC the authority to oversee the operating subsidiaries of insurance companies.
The American Council of Life Insurers, Washington, has sent one letter to Financial Services Committee members, and the major property-casualty groups have sent committee members a separate letter.
The p-c groups that signed the letter are the American Insurance Association, Washington; the Independent Insurance Agents and Brokers of America, Alexandria, Va.; the National Association of Mutual Insurance Companies, Indianapolis; the Property Casualty Insurers Association of America, Des Plaines, Ill.; and the Reinsurance Association of America, Washington.
The groups are asking that large insurers not be subject to any oversight by bank regulators unfamiliar with the insurance industry regulatory scheme.
They also are asking that bank regulators not have the authority to determine whether insurers should be responsible for contributing into a fund that would be used to pay for resolving troubled financial institutions.
In addition, they are questioning a proposed amendment that would require institutions that are designated systemically important to pay in advance into a fund that would be used to resolve insolvent financial institutions.