As anticipated, the Federal Reserve Board formally applied to the International Association of Insurance Supervisors (IAIS) Oct. 25 in an application that lays out the full scope of its powers and breadth as a central bank.
Although the Federal Reserve has had oversight of various insurance companies that owned banks and thrifts, and as such were organized as these holding companies, the Fed’s involvement in the IAIS dovetails more neatly with the new international policies underway for big, international insurers as well as recent, domestic developments under the Dodd-Frank Act implementation.
Specifically, AIG and Prudential Financial were recently designated as systemically important financial institutions (SIFIs) by the Financial Stability Oversight Council (FSOC), of which the Fed is a member. Also recently, the IAIS, with the Financial Stability Board (FSB), designated three U.S. insurers — AIG, Prudential and MetLife – as globally systemically important, subjecting them to IAIS-developed enhanced supervision and then proposed a first-ever capital standard for internationally active insurance groups.
The Federal Reserve is already a member of the FSB, along with Treasury and the Securities and Exchange Commission. Many of FSB’s members are central bankers, which has unsettled the U.S. insurance sector, such as the NAIC and various insurance companies and their representatives. IAIS Secretary-General Yoshi Kawai, to whom the Fed letter was directed, is a member of the FSB as well.
The Fed wants a hand in shaping supervisory policy abroad for its domestic companies. It will be working with the Treasury’s Federal Insurance Office (FIO), also a member of FSOC, and the National Association of Insurance Commissioners (NAIC) and state regulators representing U.S. and/or state regulatory interests abroad. FIO is designated by Dodd-Frank in such a role, but in international gatherings there has been some friction about the various U.S. voices. The NAIC and FIO are both on the Executive Committee. Sources have said that the Fed would also like a seat on the Executive Committee.
The representative listed is Michael Gibson, director of the division of banking supervision and regulation. However, the contact people named by Board Secretary Robert deV. Frierson are Mark E. Van Der Weide and Ann Misback, deputy director and associate director with that division. They may be the ones attending the IAIS meetings. Van Der Weide has previously testified before Congress on Dodd-Frank and credit ratings.
A biography of Van Der Weide, a Yale lawyer, says he helped develop the enhanced prudential standards proposed by the Board of Governors of the Federal Reserve System under section 165 of the Dodd-Frank Act. He was detailed to the U.S. Treasury Department during 2009-2010, where he provided assistance to the Administration in its efforts to implement the comprehensive financial reform legislation.
Ann Misback has met with lobbyists and industry participants on various aspects of Dodd-Frank, including the Volcker Rule, and is also a key person on implementation of the enhanced prudential standards required to be established under section 165 of the Dodd-Frank Act for financial companies supervised by the Board.
Gibson has spoken to insurers before, namely at an NAIC forum in May, discussing trying to mesh various elements of Federal Reserve capital standards supervision of its financial companies under Dodd Frank so they make sense for insurers.
The IAIS will grant the Fed’s membership as it is an insurance regulator. How committee assignments are divvied up is another story.