MetLife “won’t keep systemic risk regulators up at night,” its chairman and CEO said today in Washington in describing in stark terms why the insurers should not be designated as systemically significant (SIFI).
In comments at a Capital Markets Summit sponsored by the U.S. Chamber of Commerce, Steven Kandarian said that “life insurers as SIFIs are a case of mistaken identity.”
The comments were part of an all-out campaign by MetLife and Kandarian to retain the company’s current status outside of the scope of federal oversight.
He reiterated that the life insurance business did not cause the financial crisis, and that imposing bank-centric regulations on certain life insurance companies — however well-intentioned the purpose — “would negatively affect the availability and affordability of financial protection for consumers.”
Kandarian said that the Dodd-Frank financial services reform law defines a SIFI as a company whose failure “could pose a threat to the financial stability of the U.S.”
He said the FSOC has clarified that “such a threat only exists if ‘there would be an impairment … of financial market functioning that would be sufficiently severe to inflict significant damage to the broader economy.’ ”
Simply put, Kandarian said, “there is no evidence that any traditional life insurance company meets that test.”
Kandarian acknowledged that the need for the federal government to bail out a hugely troubled AIG in 2008 “is the elephant in the room” as the government considers whether to designate some insurance companies as SIFIs.
But, he said, “AIG’s life insurance subsidiaries did not cause the company’s financial distress. They were victims of it.”
See also: Sympathy for AIG
He cited the impact of AIG’s involvement with credit default swaps as the primary reason for its near failure, adding: “None of this is to deny that regulators should closely examine the activities of life insurance companies. But, in my view, there is a better way to accomplish this goal than by potentially singling out three of the nation’s 895 insurance companies for SIFI designation.”