While larger insurers are waiting to hear whether they will be subject to an extra layer of oversight – as a result of being named a systemically important financial institution (SIFI) by the Financial Stability Oversight Council – Fitch reassures smaller domestic insurers with larger foreign parents, saying it is doubtful they would be considered SIFIs.
“Ultimately, we think it is unlikely that the Federal Reserve Board (FRB) would want to commit resources to overseeing these foreign-owned insurance companies,” Fitch said. “Further, the oversight of these companies could complicate cross-border regulation of global insurance organizations including U.S. companies with overseas operations.”
The FSOC decision on naming nonbank financial institutions as SIFIs is expected in “the near term,” according to U.S. Treasury Secretary Jacob Lew in his Monday testimony.
The American Council of Life Insurers, however, is more concerned with foreign nonbank financial companies (NFCs) and a new rule the FRB proposed to implement “enhanced prudential standards and early remediation requirements for foreign NFCs.
The rule is part of the Dodd-Frank reform, and according to Fitch, applies to foreign banks and foreign NFCs designated SIFIs.
The ACLI is asking the FRB to reintroduce the rule with a more specific explanation or exclude foreign NFCs from the rule.
