NAIC Panel Plows Ahead on Dodd-Frank Receivership Draft

The working group has been talking about matters such as how state regulators should go about monitoring federally regulated entities related to insurers before obvious problems crop up. Another issue that has surfaced is the idea of trying to reduce the likelihood that judicial intervention could interfere with efforts to deal with a financial emergency at a systemically important insurer.

David Leifer, an associate general counsel at the ACLI, Washington, and Wayne Mehlman, a senior counsel at the ACLI, write in a comment letter that they like the handbook chapter draft, believe it is well-written and believe it reinforces the role that state receivership laws would play in any insurer resolution involving the Dodd-Frank Act.

“It is our position that distressed insurance entities regardless of size or designation are best left to the supervision of appropriate state regulators pursuant to long established state supervision and receivership laws,” Leifer and Mehlman say. “Execution and implementation, though, will necessarily be left in the hands of individual regulators. To this end, we urge the NAIC to infuse the draft chapter with an anticipation of the sense of urgency that will inevitably accompany any designation of a large insurance entity once it has been determined to be distressed.”

Any crisis similar to the credit market freeze that hit in 2008 “is unlikely to accommodate careful deliberation and time-consuming coordination among regulators,” the ACLI reps say. “Rather, events will dictate that decisions be made quickly and by those most familiar with the circumstances of the entity in question.”

The FDIC should defer to state insurance regulators whenever possible, and state insurance regulators should take meaningful steps to prepare for an OLA event as far in advance as possible, the ACLI reps say.

The ACLI reps note that the FDIC appears to have the authority to liquidate the non-insurance subsidiaries of distressed, systemically important insurers.

“Insurance regulators should be urged to be proactive in educating federal regulators about the negative financial implications of possibly liquidating or putting liens on such subsidiaries since it may undermine the financial stability of the parent insurance company,” the ACLI reps say.

Other OLA coverage from National Underwriter Life & Health:

• FDIC Publishes Orderly Liquidation Authority Final Rule
• FDIC Plans to Snuggle Up to SIFIs
• Life Insurers to FDIC: Take Us to Our Own Doctors
• Wolin on Dodd-Frank: FIO is Up and Running
• FDIC Rule Could Affect Insurers
• FDIC to Avoid Insurance Asset Liens
• Dodd Frank: FDIC Posts Liquidation Rules Draft