Insurers Weigh In On Systemic Risk

The American Council of Life Insurers, the American Insurance Association and the Reinsurance Association of America are asking a new federal body tasked with mitigating systemic risk to go slow when it comes to implementing new rules mandated by the Dodd-Frank Act (DFA).

The Financial Stability Oversight Council (FSOC) is to be made up of 10 voting members—nine federal financial regulatory agencies and an independent member with insurance expertise. It is also supposed to have five nonvoting members, one of which will be the yet-to-be-named head of new Federal Insurance Office. In their letter, the associations say the FSOC should delay any rulemaking because both slots reserved for council members with insurance expertise remain vacant.

“We do not believe that the insurance members on the Council that are awaiting appointment should take a back seat to members who have already been designated,” the letter states. “Accordingly, we strongly believe that it would be contrary to Congressional intent and do a disservice to the Council and to the insurance industry for the Council to proceed without the full complement of members who are able to provide critical input to the Council and participate in the Council’s important decisions that will affect the insurance industry long into the future. It is therefore inappropriate for the Council to set in motion a process before it has had the opportunity to obtain the advice of the voting member with insurance expertise and the Director of the Federal Insurance Office.”

Furthermore, the associations expressed displeasure with the vagueness surrounding the metrics that determines which nonbank financial companies will come under FSOC purview.

“ACLI, AIA and the RAA are concerned that notwithstanding the extensive comments provided to the Council in response to its October advanced notice of proposed rulemaking (ANPR), nothing in the actual language of the Proposed Rule provides nonbank financial companies with any guidance as to the standards that the Council intends to apply in carrying out its functions to determine whether or not to subject a financial company to the Board’s supervision and to enhanced prudential standards.”