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August 27, 2013 at 06:48 AM
Indianapolis — MetLife has been sharing with federal and state regulators what it calls an alternative framework to Basel III capital standards for insurers, which is more of an aggregation of local regulations than specific capital rules. The only regulator who can impose them, however, thinks a change in the law might be necessary.
That is according to the presentation given yesterday by MetLife executives to the National Association of Insurance Commissioners (NAIC) Government Relations Leadership Council meeting here in Indianapolis. The meeting was led by former Bank of America risk manager and current MetLife Treasurer Marlene Debel.
Debel presented a document that addressed solvency frameworks for insurers subject to regulation by the Federal Reserve Board’s prudential regulation. MetLife is under serious consideration as a systemically important financial institution (SIFI) by the U.S. Financial Stability Oversight Council (FSOC), which would move it under Fed oversight and Dodd-Frank-mandated capital rules for Fed-regulated institutions. AIG — and likely Prudential Insurance if it loses its appeal to FSOC on its proposed designation — is already designated as a SIFI.
MetLife contrasted the current framework of Basel III, which the New York insurer called disruptive, bank-centric and misaligned with insurance risk, especially with regard to separate accounts.
Insurers that operate thrifts, organized as savings and loan holding companies, will be temporarily exempt from new, tighter capital standards imposed on larger financial institutions under the Basel III capital regimen, the Federal Reserve Board opined yesterday in a new final rule.
Only holding company activities would be subject to Basel III rules under MetLife’s approach, which it developed with outside consultants Oliver Wyman and Promontory.
Insurance statutory regulations would apply to insurance subsidiaries while captives, banks and other entities could still be subject to Basel III in the proposed framework.
MetLife also said its framework is compatible with emerging global systemically important insurer (GSII) requirements, such as higher loss absorbency and other stipulations. MetLife was designated a GSII but implementation of that is tethered to U.S. regulatory authority (ies).
