Steve Kandarian, the chairman, president and chief executive of MetLife Inc., had one clear message for regulators on Wednesday: Leave us alone.

Speaking before the U.S. Chamber of Commerce, Kandarian made the case why regulators should not designate his firm as systemically important, a decision that would subject it to tough supervision by the Federal Reserve Board.

While Kandarian acknowledged that life insurance companies might engage in activities that are systemic if they are insufficiently regulated, he said MetLife should not be singled out.

"As an institution we cannot see how we pose a threat to the broader economy — in fact, we cannot see how a single firm would be brought down by its exposure to MetLife," said Kandarian.

At issue are new powers granted to regulators by the Dodd-Frank Act. The Financial Stability Oversight Council, headed by Treasury Secretary Jacob Lew and comprised of 10 regulators, has the power to designate non-bank financial companies as systemically important. The first batch of such designations is expected soon.

During his speech, Kandarian said his company, and others like it, might fail, but that the life insurance business is not systemically important.

"I am not saying that life insurance companies cannot fail. Nor am I saying MetLife could never fail. What I am saying is that the traditional business of life insurance does not pose systemic risk," said Kandarian.

Even though regulators have acknowledged that banks and life insurance companies should be regulated differently, Kandarian said "no amount of 'tailoring' will ever make bank capital standards fit a life insurer's balance sheet."

"Bank capital rules were established to protect depositors," he said. "They were not designed to ensure that a life insurance company can meet its long-term policyholder obligations."

Pointing to proposed Basel III standards, he said capital requirements would be highly constrictive and cause life insurance companies to raise the price of their products or reduce the amount of risk they take. The company's risk-weighted assets would more than double and capital ratios would "wither," he said.

"It is hard for me to see how life insurers living under Basel III could remain in the variable annuity business, which would push risk and cost back onto a population in dire need of retirement income solutions," said Kandarian.

Kandarian said regulators should take a different approach by focusing on an activities rather than a company-specific approach. He said a company-specific approach that looks at the size of an institutions, risks overlooking true threats to the financial system. Focusing on certain activities, however, might better guard against economic threats, he said.

Dodd-Frank provided policymakers with authority to adopt an activities-based approach to systemic risk, according to Kandarian. As a result, the Office of Financial Research could collect data that would be provided to the FSCO to monitor non-banks that engage in such activities. FSOC, he said, could then use its power to recommend additional prudential requirements for higher risk activities. That recommendation would then be made to the primary financial regulator of the firm.

"An activities-based approach is also consistent with how regulation of the life insurance business is evolving internationally," said Kandarian. "I hope we can agree that an activities-based approach would eliminate regulatory 'gaps' and provide protection against another AIG by subjecting all potentially systemic activities to regulatory scrutiny."

This story originally appeared at American Banker.

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