The Financial Services Roundtable wants the Treasury Department to use the Federal Insurance Office to coordinate the activities of all federal agencies regarding insurance in order to ensure that onerous and duplicative federal intervention in the insurance business doesn’t occur.
The letter was written to Treasury secretary Timothy Geithner this week and obtained by National Underwriter.
“Our hope is that the FIO will play a significant role, in concert with other insurance experts on the Financial Stability Oversight Council, in ensuring that any new regulation imposed on insurers is commensurate with the risk targeted for mitigation,” the letter said.
The letter was signed by FSR president and CEO Steve Bartlett.
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It was written after Geithner spoke at FSR’s mid-winter forum for members.
The letter was written just after the Federal Reserve Board decided after a stress test to bar MetLife from buying back stop or increasing its dividend. MetLife was one of 19 large financial institutions to undergo a stress test.
Regarding MetLife, but without mentioning what happened by name, the FSR letter said that, “We believe that the FIO can assist the members of the Financial Stability Oversight Council in evaluating the unique risk characteristics of insurance companies, which are very different than the risks associated with a bank holding company.”
Regarding the actions of the Fed in designating insurers as systemically significant, the letter said that, “The FIO and Treasury should assist the Federal Reserve in evaluating how these rules could impact the business model, capital structure and statutory risk factors of insurance companies, in the event any insurance groups are designated pursuant to such rules.”
In the wake of the Fed action, Dave Jones, California insurance commissioner, issued a statement reaffirming that MetLife’s life insurance group “exceeds insurance financial solvency requirements.”
Jones said that, “I believe the Federal Reserve’s ‘stress test’ is directed primarily at non-insurer financial institutions and the non-insurance operations of institutions with insurance subsidiaries.”
He said the methodology utilized for analyzing and stress testing banks is not intended to measure insurance solvency as the business models are quite different.”
He added that, “While we are confident that Metropolitan Life Insurance Group is financially strong, we will continue to monitor its insurance operations and protect the interests of insurance consumers.”
At the same time, Aite Group research director Clark Troy said that MetLife’s failure of the Federal Reserve Bank’s most recent stress test “points out the double-edged sword of the post Dodd-Frank regulatory environment.”
Aite is based in Boston and has offices in the U.S. and overseas.