Federal financial services regulators could end up leaving state insurance regulators in charge of ensuring that giant insurers exercise and eat their vegetables.
The head of a group for state insurance regulators is welcoming a Financial Stability Oversight Council (FSOC) proposal that could give him and his colleagues more authority over insurance giant wellness.
Eric Cioppa, president of the National Association of Insurance Commissioners (NAIC), put out a statement responding to proposed changes in how FSOC identifies organizations other than banks that are too important to the stability of the U.S. financial system to fail, and how FSOC responds to concerns about those organizations’ financial health.
“I am generally supportive of this proposal and look forward to the reactions of my insurance regulator colleagues,” Cioppa said in a statement. “The most appropriate approach to addressing risks to financial stability is for FSOC to work in conjunction with existing regulators to identify those risks, especially in the non-bank sectors. Mitigation is best handled by the regulators with authorities to address them in the first instance.”
The 2007-2009 Great Recession led to complicated problems in the U.S. financial system.
Many insurers and other nonbank companies joined banks in seeking financial support from the federal government, in an effort to cope with sudden, recession-linked paralysis in the credit markets.
When Congress developed the Dodd-Frank Wall Street Reform and Consumer Protection Act, it set up FSOC to help the federal government understand and manage problems that could lead to another Great Recession. FSOC is headed by the U.S. Treasury secretary. It also includes the heads of federal financial services regulatory agencies, and it includes a member who has insurance expertise.
FSOC set up a program for identifying ”nonbank systemically important financial institutions,” or nonbank SIFIs. Nonbank SIFIs are supposed to be organizations that are too big, or too important in other ways, to fail.