New Regulatory Non-Governmental Council Formed

These agencies were created by the Dodd-Frank financial services reform law to monitor risks created, for example, by the problems at American International Group.

In comments following publication of a final rule the FSOC will use in evaluating whether an institution should be cited as “systemically significant,” insurance industry officials said no insurers should be so designated.

J. Stephen Zielezienski, the American Insurance Association’s (AIA) general counsel, said the AIA believes property & casualty insurers should be screened out of the systemically important financial institutions (SIFI) designation since they do not pose a threat to financial stability.

“AIA hopes that [the FSOC] will use the designation sparingly and apply it only to the companies that pose a systemic threat to U.S. financial stability.”

And, Ben McKay, senior vice president of federal government relations for the Property Casualty Insurers Association of America, said in a statement, “The final FSOC rule takes important steps to recognize that traditional home, auto and business-insurance activities are not systemically important.”

And, a House panel held a hearing on May 16 on the decision by the Federal Reserve Board to stop MetLife from increasing its dividends and buying back as a result of the findings of a so-called stress test administered to MetLife as well as more than a dozen large U.S. financial institutions.

At the hearing, Metropolitan Life Insurance Co., Americas, President William “Bill” Wheeler objected to designating a handful of insurance companies as SIFIs because it would upset the insurance industry balance in the United States.

The government will be “picking winners and losers in the insurance industry,” Wheeler warned lawmakers.

Last November, a subcommittee of the House Financial Services Committee held a hearing on three proposals by state legislators that would have limited the authority of the FSOC to examine insurance companies.

The three bills supported by state regulators would, respectively, revoke the authority of the Federal Insurance Office and the OFR within the Treasury to subpoena information from insurance companies; “explicitly and entirely” exclude insurance companies, including mutual insurance holding companies, from the Federal Deposit Insurance Corp.’s “orderly liquidation authority” for troubled large non-banks; and “preclude” the Federal Reserve from establishing higher prudential financial standards for troubled insurance companies it would oversee as ordered by the FSOC.

In a letter sent to the committee, officials of the National Association of Mutual Insurance Companies (NAMIC) said it is “unnecessary for property and casualty insurance companies to be overseen by the FSOC as potentially “systemically significant,” and Congress should move to take away that authority.

The NAMIC said passage of three bills sought by state regulators that would severely roll back federal authority to oversee insurance companies should only be the start of legislative action to curb federal oversight of insurance companies.

Charles Chamness, NAMIC president and CEO, said in the letter that the three legislative proposals to be considered “represent an excellent first step toward bringing much-needed certainty to insurance markets,” but stressed the prevention of new and unnecessary regulation of insurers by the FSOC.