Fed calls for data in quantitative impact study on ‘its’ insurers

Washington, Sept. 30 —

It’s here. The Federal Reserve Board today invited insurers to participate in a voluntary data collection for a quantitative impact study (QIS) to analyze the impact of various aspects of the regulatory capital framework.
The study will be designed to help the Fed to possibly tailor its capital requirements for its supervised institutions, which include savings and loans substantially engaged in insurance underwriting activities, and Dodd Frank’s nonbank/insurance systemically important financial institutions (SIFIs.)
Section 171 of the Dodd-Frank Act requires, in part, that the Board establish consolidated minimum risk-based and leverage requirements for depository institution holding companies and nonbank financial companies supervised by the Board that are not less than the generally applicable risk-based capital and leverage requirements that apply to insured depository institutions.
The QIS is more than a glimmer of hope for insurers who were concerned about draconian, ill-placed capital standards that did not befit their capital structure mixed with inflexibility in rule interpretation with regard to long-tail liabilities and premium collection.
The Fed says the QIS is being conducted to allow the Board to better understand how to design a capital framework for insurance holding companies that is compliant with Section 171, the so-called (Maine GOP Sen. Susan) Collins Amendment.

View from then-new Federal Reserve building, May 1937, courtesy LOC archives

View from then-new Federal Reserve building, May 1937, courtesy LOC archives

The study’s results could help tailor capital requirements for insurers even without the pending Congressional legislation, as the Fed follows for a two-track system.
Under the track where there is no legislative fix for the Collins Amendment, the Fed would “still be able to do some things because there are insurance products…that do not resemble existing bank products. And so in some cases, we can and we’re already planning to assign different risk weights to those based upon our assessment of the actual risk associated with — with those assets,” in the words of Fed Board Gov. Mark Tarullo before a Senate Banking Committee earlier this month.
By getting more information from the insurance companies, Tarullo said then, “We hope to actually find a few other areas where consistent with existing statutory requirements, we could still make some adjustments.”
He said it “all come down to core insurance activities and the different kind of liability risks that are associated with them, noting the assets are often the same but that it is on the liability side of the balance sheet where an insurer capital structure is unique and deserves a different treatment, perhaps.
Tarullo said that the Fed would “like to be able to take (the liability difference between insurers and banks) into account” during his testimony.
Information provided via the QIS should be as of year-end 2013, unless noted otherwise for purposes of reporting specific line items. Note that the Federal Reserve may follow-up with participating firms to better understand the information provided in the final submission package.
The QIS template and QIS instructions were developed exclusively for the purposes of this data collection exercise. The QIS data collection and subsequent analysis of that data are not to be construed as an official interpretation of other documents published by the Federal Reserve System or as representing any final decisions regarding implementation of a regulatory capital framework or reporting requirements for the firms in scope. Data and responses provided via the QIS will be used and maintained in a manner that  the Fed says is designed to preserve firm anonymity and confidentiality of the voluntarily-submitted data.

The reporting template is detailed with many subcategories that add up to toal capital, including amounts such as  capital requirements for underwriting risks, including international subsidiaries and total investments in the Tier 2 capital instrument of other financial institutions that the holding company holds reciprocally, where such reciprocal crossholdings result from a formal or informal arrangement to swap, exchange, or otherwise intend to hold.

Exposures and debt obligations, performance standby letters of credit and transaction-related contingent items are also to be detailed in the line by line data call.

The Fed seems open to collecting any and all information the insurer can produce, in a form that can reflect statutory or national accounting standards.

The QIS template is divided into four parts: Part I: Regulatory Capital Components and Ratios; Part II: Risk-weighted Assets; Part III: Separate Account Data; and  Part IV: State-based or Foreign Equivalent Risk-Based Capital (RBC) Requirements.

Parts I and II are based on Federal Reserve’s regulatory capital schedule for holding companies modified as appropriate for the QIS, and ask for consolidated data under Generally Accepted Accounting Principles (GAAP). T

The QIS instructions for Parts I and II also include guidance on reporting insurance-specific assets, as well as general guidance on expectations for estimating GAAP numbers for companies that produce financial statements based only upon Statutory Accounting Principles (SAP).

Firms that produce financial statements based upon SAP only are requested to include narrative responses to certain questions to provide the Federal Reserve with a better understanding of the assumptions used to estimate amounts under GAAP, as well as a breakdown of certain regulatory capital components and insurance-specific assets.

House capital standards ‘fix’ won’t fly with weighted feathers, some complain

UPDATE: Bill PASSES the House on Tuesday evening with three measures attached–collateralized loan obligation rules, mortgage transaction fees, points definitions and business risk mitigation and price stabilization requirements. More coverage in future post.
Washington, Sept. 16–
The insurance industry is bracing for possible action tonight from the U.S. House on the Dodd-Frank Act’s Collins Amendment fix or HR 5461, the “Insurance Capital Standards Clarification Act of 2014,” after fits and starts, centered on what Congresswoman Maxine Waters, D-CA, Ranking Member of the Financial Services Committee (FSC) called”three divisive measures that make substantive changes” to the 2010 law.
The measure is based on legislation introduced by Rep. Gary Miller, R-CA., and Rep. Carolyn McCarthy D-N.Y., and sponsored also by sponsored by Rep. Andy Barr, R-Ky., and would clarify the Fed’s authority under the Dodd-Frank Act’s Collins Amendment.
Another person close to the insurance industry called it a game of cat and mouse, with the House leadership adding new provisions despite hearing from the Senate the bill would be a no-go there and on the President’s desk, as well. Another merely called it “messy,” with added provisions on requirements regarding mortgage transaction fees and collateralized loan obligations.
The unadulteratedfe9f3d5e-3084-4b0a-8afa-3b41Maxine Waters JPEG879a573d “fix” provision is largely backed by the entire insurance sector involved and most of Congress who has weighed in, and the chairman of the FSC, Rep. Jeb Hensarling, R-Texas, has promised the industry a clean bill during the lame duck period after the elections, according to a source.
The legislative solution to the tightly wrought Section 171 of the Act would allow the Federal Reserve Board flexibility in applying the required minimum capital standards on its regulated entities engaged predominantly in insurance.
Otherwise, the Fed has said it basically has no choice but to require the capital standards whether for insurers or banks, even though it has acknowledged in various arenas that insurance capital is not measured the same way or for the same purposes as bank capital.
Over in the Senate, a bipartisan bill has passed, and Fed Gov. Daniel K. Tarullo has said clarifying legislation would be welcome.
“We can and should make common-sense changes to lessen the regulatory burden,” Tarullo stated at a hearing last week in the Senate. Regarding giving the Fed flexibility to tailor the capital standards it places on insurance companies, the Senate passed, by unanimous consent, a fix so that insurance companies are not subject to bank-like capital requirements contrary to their business mode, he pointed out.
Tarullo testified that it “would be very welcome if the House would follow” the Senate’s lead and enact the legislation, to give the Fed the kind of flexibility in making an assessment on the liability vulnerabilities of insurance companies that are unique to insurance companies.
Meanwhile the Fed is going to conduct a quantitative impact study to try to develop some more information on insurance industry specific products, and look at what it calls the liability vulnerabilities of insurers.
Back in the House, Waters complained that the House is “circumventing and politicizing” the process so that the fix, if packaged with other measures, will go nowhere in the Senate.
“Make no mistake – but for the Chairman’s intransigence, the insurance capital fix bill could be on the President’s desk for signature tomorrow,” Waters stated.
What the ed does determine on capital adequacy for insurers under its purview–systemically important institutions and insurers with savings & loans- is still unknown, but some analysts think it could mirror what the standard is globally as the G-20’s Financial Stability Board adopts the proposed capital requirements for global systemically important insurers (G-SIIs) from the International Association of Insurance Supervisors (IAIS).
This is a good indication of what future capital standards from the Federal Reserve will look like for domestic SIFI insurers, says a note from Washington Analysis.
“While it is likely to be modified by U.S.regulators, we view the IAIS proposal as manageable for the group, as it is tailored to insurance and similar in many ways to existing Risk Based Capital (RBC) requirements. We do not expect the Fed to propose domestic capital requirements until Q1 2015, at the earliest, with final rules unlikely until at least mid-2015,” Washington Analysis said in a note to its clients and others.
In the meantime, eyes are also on Tarullo’s fixation with insurance liabilities and how the Fed will weigh them as it develops capital standards for its stable of insurers, which include Prudential Financial, AIG and TIAA-Cref.
Under one alternative, the Fed “would be able to take account of the different liability structure of core insurance kind of activities and that would allow us to shape capital requirements at the consolidated holding company level in a way that fully took account of those differences in business model, Tarullo said in his Sept. 9 Senate testimony before the Banking, Housing and Urban Committee.

*Photo of maxine Waters courtesy of http://waters.house.gov/

Lawmakers to Lew: why treat insurers differently in FSOC risk review?

Two days before the Financial Stability Oversight Council (FSOC) is due to discuss, at minimum, insurance company systemic risk designations, a group of seven Congressmen led by Rep. Scott Garrett, R-N.J., wrote to Secretary Treasury Jacob Lew with concerns that the Council is not giving insurers a fair shake.

 1839 Kollner ink and ink wash landscape of Capitol Hill,  before the dome had been added to the Capitol. Courtesy, LOC.

1839 Kollner ink and ink wash over graphite landscape of Capitol Hill, before the dome had been added to the Capitol itself. Courtesy LOC.


The treatment of the insurance industry didn’t get the public analytical effort that the asset management industry did in the FSOCs “rush” to designate firms as systemically important financial institutions (SIFIs), leading to disparate treatment of insurers, the Congressmen charged in the Sept. 2 letter.

Treasury has said before it does a very through review of the companies it reviews. metLife has been under consideration as a potential SIFI for over a year-the deliberations have not been made public nor has Treasury ever acknowledged that this company was under review.

The Council has devoted far less effort to empirical analysis, stakeholder outreach, and transparency in its consideration of insurance companies for designation than it has for asset management firms,” the Congressmen alleged.

The preliminary agenda of the Sept. 4 closed FSOC meeting includes a discussion of nonbank financial company designations as well as consideration of the Council’s fiscal year 2015 budget, and discussion of the Council’s work on asset management, according to a notice from the Treasury Department.

Joining Garrett, chairman of the Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, were GOP Reps. Ed Royce, R-Calif., Sean Duffy, R-Wis., Dennis Ross, R-Fla., Spencer Bachus, R-Ala., Steve Stivers, R-OH, and Mick Mulvaney, R-SC.

They asked Lew for the rationale behind the approaches to the insurance industry in its consideration of potential SIFIs, including MetLife, which may or may not go to a Council vote tomorrow for proposed SIFI designation, depending on how ready Council members are.

The Office of Financial Research (OFR), which provides research for FSOC, published a report on the asset management industry in September 13. Although the quality of the report was roundly criticized by the Congressmen and some in the industry, they used it as a point of comparison in contrast with lack of such a report for the insurance industry. The lawmakers also noted that the FSOC held a public conference on asset management back in May but questioned why a similar exercise was conducted before designating insurers as SIFIs.

Some prominent lawmakers have been busy this year sending letters to Lew and otherwise passing legislation along party line votes through committee to attempt to gain some insight control over the FSOC process, either through efforts to make it more transparent to the public or at least certain Congressional members, or to get concrete feedback on the decision-making process for nonbank SIFIs.

Garrett himself, who introduced the Financial Stability Oversight Council (FSOC) Transparency and Accountability Act (H.R. 4387), was barred from a March 2014 FSOC meting he tried to attend.

Thus far, non bank SIFIS are AIG, GE Capital and Prudential. No asset managers have yet been named. Two insurers are under consideration, MetLife, which underwent Stage 3 analysis and has had its books formally “closed by the FSOC and another company in Stage 2, according to the minutes, which is perhaps Berkshire Hathaway, as a reinsurer, but which could be another big life insurance company, as well.

If  MetLife is designated, it would be subject to enhanced prudential supervision from the Federal Reserve Board, with a host of accompanying  holding company oversight and capital standards, a yet to be worked out by the Fed. A vote by the 10-member Council would not mean a proposed SIFI designation is official until MetLife is given a chance to respond, which may mean it decides to appeal or does nothing until the time-frame to respond elapses.

NAIC does its housework, ponders internat’l stance amid concerns

Reports from the National Association of Insurance Commissioners (NAIC) summer meeting in Louisville, Ky., demonstrate a desire for the United States to take a uniform national position in international insurance capital regime debates, work on a better way to achieve sound corporate governance and make progress on the reinsurance framework for captives.
On the domestic front, the Executive Committee of the NAIC adopted the XXX/AXXX Triple X/ Actuarial Guideline 38) Reinsurance Framework, which carries with it an action plan to develop proposed changes to the insurer/captive regulations and model laws dealing with ceding reserves in these transactions.
The framework would require the ceding company to disclose the assets and securities used to support the reserves and hold an risk-based capital cushion if the captive does not file RBC. It would not change the statutory reserve requirements. 

The NAIC agreed to move forward to develop a comprehensive framework proposal while numerous groups will develop the details to create the framework, to be approved later by NAIC membership.

The XXX/AG 38 issue propelled itself to the regulatory spotlight more than three years ago in the life actuarial task force meetings, and in the ensuing months and  years, caught the interest of the  Financial Stability Oversight Council (FSOC), the Federal Insurance Office (FIO) and the Federal Reserve. The pressure to find solutions has been ongoing, with the NAIC using its resources and an outside actuarial consultant to create the semblance of a national system  to deal with what some in the life insurance industry say are redundant reserves that choke their books ad others claim is regulatory arbitrage.

The NAIC also  adopted a Corporate Governance Annual Disclosure Model Act and supporting Model Regulation Monday, Aug.. 18. Under it, U.S. insurers will be required to provide a detailed narrative describing governance practices to their lead state or domestic regulator by June 1st of each year. This narrative will be protected by strict confidentiality measures,  which was vastly important to insurers as they would be baring their governance practices to regulators. 

The new corporate governance disclosure requirements are expected to start in 2016, according to the NAIC.

An international capital standards forum featured insurers and regulators, both from the states and the Federal Reserve Board’s insurance policy shop pushing for a U.S.-centric approach or position, with both life insurance and non-life insurance standards, according to one attendee.
The International Association of Insurance Supervisors (IAIS) is creating insurance capital standards under the auspices of the Financial Stability Board (FSB.)
Insurers are concerned that standards are appropriate to the life insurance industry, which offers long duration products and requires a different valuation principle to capture market swings over a generational period of policy obligations. Otherwise, insurers argue, these market swings could create capital standard costs that would be passed on to consumers making products such as long term care and annuities, essential retirement products, unattractive to consumers.
Even the consumer advocates, who may or may not have a role in the  IAIS going forward, if the IAIS drops its observer status, pointed out that the focus on capital is misplaced, according to attendees. It doesn’t address defective, systemically risky products, it was argued.
Pennsylvania Commissioner Michael Consedine noted that when the U.S. speaks with one voice, it is hard to ignore. Consedine is NAIC vice president and chair of the International Insurance Relations (G) Committee (NAIC) but it is hard to fathom what that will be with the FIO  reflecting the Treasury position and maintaining an essential role at the IAIS, along with the NAIC and now the Federal Reserve.

The NAIC, according to a source recap of the meeting, would like to see any model adequately tested, and generally embraces its approach, which protects consumers and not allow capital to flow outside the policyholder protection net.
Consedine has a big year ahead of him as NAIC president-elect and international leader on state insurance regulatory matters–if his governor, Tom Corbett, a Republican, survives a challenge from Democratic opponent, Tom Wolf. Recent polls show Corbett, who was drastically down in the polls, starting to gain some points back.

Another veteran on the international state regulatory scene, the previous head of the G Committee and a member of the IAIS executive committee, Tom Leonardi, is also appointed by a governor facing a tough reelection campaign in Connecticut, where the Republican contender, Tom Foley is polling ahead of Gov. Dannell Malloy.

Leonardi said that although there are potential benefits to adoption of a uniform global capital standard, he still questions the need for a global capital standard. Capital is not fungible, particularly when a company is in financial distress, he noted at the meeting. Implementation with another capital standard that has little in common with existing regulatory standards and industry practices make it a very expensive process to implement, he told attendees at the event.  There is a need to look at a jurisdiction’s entire solvency regulatory regime, which is not standard around the world, Leonardi noted.  

A concern we have, stated Montana Insurance Commissioner and current NAIC president-elect  Monica Lindeen in  an International Insurance Society address June 23,  “is that the last crisis was a banking crisis, not an insurance crisis, yet much of the international discussion and some of the prescriptions proposed for insurers seem very similar to banking solutions developed by banking regulators.”

“In the U.S., we regulate insurance on a legal-entity basis…. If the liabilities are in the U.S., then we expect the assets and capital that support the U.S. business to be there as well. In fact, the strongest protection to the financial system and policyholders might well be that each legal entity, including the holding company, holds capital commensurate with its risks,” Lindeen told the international audience.

Fed hires Tom Sullivan as its insurance chief

The Federal Reserve Board has hired an insurance regulatory chief after a long search for an insurance expert to fill the new position. Former Connecticut insurance regulator and industry consultant Tom Sullivan has accepted a position as the senior advisor for insurance to the Board of Governors.
A Fed spokesperson for the board said he starts the high-profile post June 9.
As such, Sullivan will be representing the Fed at all domestic and international insurance forums, he stated in an email to colleagues in the insurance sector.
Sullivan has most recently been a partner at PricewaterhouseCoopers. Word was that the well-regarded insurance regulatory expert was also once on the short list for NAIC CEO before the organization hired Sen. Ben Nelson, D-Neb., for the post a year and a-halfago.
The Fed, as a prudential regulator of systemically important insurers (non-bank SIFIs) and insurers with thrift holding companies (SLHCs), has an ever-more powerful voice in insurance regulation. The Fed is well as a member of the Financial Stability Board (FSB), has a seat at every table now, including at the International Association of Insurance Supervisors, in Basel.
The Fed has been seeking an insurance leader for some time, and several names have come up on the short list.
“I am excited to be joining the Fed and there is a lot of work to be done given their statutory authority as consolidated regulator for the designated insurer non-bank SIFI’s and the insurer owned SLHC’s,” Sullivan said in an email.
Sullivan will be working with insurance supervisory cohorts the NAIC’s international team of state regulators Kevin McCarty (Florida), Tom Leonardi (Connecticut) and Michael Consedine (Pennsylvania), among others, as well as the Treasury’s Federal Insurance Office (FIO.)
Sullivan takes the helm of the key insurance official title at a critical time. Controversial proposed capital standards are under development globally for insurers that are not only systemically important but that are also internationally active, and these standards must be translated to and put up for acceptance by local jurisdictions like the United States.
Congress, the Fed and U.S. insurers are struggling with what to do with seemingly inflexible strict minimum requirement capital standards that would also hammer down on insurance  SIFIs and thrift holding companies under Sections 165 and 171 of the 2010 Dodd Frank Act. Legislation is pending, with the American Council of Life Insurance (ACLI) taking out a full-page ad last week “highlighting the life insurance industry’s support for critical legislation (S. 2270 and H.R 4510) that would clarify the Federal Reserve Board’s authority to apply insurance-based capital standards to insurance companies under the Fed’s supervision.”
 Indeed,  a similar ad from the ACLI will run in Politico on June 4.
Sullivan served as Connecticut insurance commissioner throughout the 2008 financial crisis and AIG’s downfall. He was appointed by Republican Gov. Mary Jodi Rell in 2007. As chair of the NAIC’s LIfe Insurance and Annuities Committee  and has testified before Congress as a state regulator that prudential oversight of insurers by the states works, citing solvency and capital standards that “have ensured that policyholder commitments are met  and that companies remain stable.”
Sullivan is a lifelong Connecticut resident who graduated from Western Connecticut Sate University and got his MBA from the University of Connecticut.
Early reaction was positive from those who have worked with the amiable, well-seasoned executive.
“The Federal Reserve Board has made a solid appointment in choosing Thomas Sullivan, who has keen regulatory and industry insight. He understands the importance of state-based regulation, and the difference between banking and insurance. This is a great step forward that will benefit consumers and insurers,” stated current Connecticut commissioner and IAIS Executive Committee member Tom Leonardi.
Leonardi sits on numerous supervisory colleges as commissioner and is extraordinarily active in international insurance supervision,and will be working closely with Sullivan on capital standards for  and oversight discussions embedded in the IAIS’ ComFrame initiative and in higher loss absorbency standards for global systemically important insurers and reinsurers. The latter group, the reinsurers, is expected to be identified this summer by the IAIS.
NAIC President and North Dakota Insurance Commissioner Adam Hamm stated,”Tom’s strong regulatory experience, comprehension of the insurance sector, and thorough understanding of America’s national system of state-based insurance regulation will be a tremendous asset to the Board on both domestic and international issues.We look forward to working with Tom in his new position as we continue to enhance our working relationship with the Federal Reserve.”

 

Author: Liz Festa,  June 2, 2014

 

 

Is FSOC exploring other options besides SIFI designations?

In a week when U.S. insurers flocked to testify or follow or promote Congressional hearings addressing easing Dodd Frank’s federal government powers strictures on insurance company oversight, U.S. Treasury Under Secretary for Domestic Finance Mary Miller opened the door to policy options for review of industries or companies under review for systemic risk.

But is it enough to allow insurers through? Or, has that door shut?

The Treasury Secretary chairs the Financial Stability Oversight Council (FSOC) that reviews threats to stability and designates financial institutions like Prudential Financial and AIG as systemically risky (SIFIs.) If FSOC identifies risks posed by asset managers or their activities that pose a threat to financial stability, it has a number of policy options, Miller stated during an FSOC-hosted conference on the asset management industry May 19.

These options include highlighting potential emerging threats in its annual reports to Congress, making recommendations to existing primary regulators to apply heightened standards and safeguards, and, of course, the SIFI-label: designating individual firms on a company-specific basis.

“If we identify risks that require action, we will seek to deploy the most appropriate remedy,” Miller stated in her remarks. However, “it is possible that at the end of this comprehensive review, the Council may choose to take no action,” she allowed.

Options seen as less radical than a SIFI designation which subjects  a company to enhanced (to put it mildly) prudential supervision under the Federal Reserve Board’s regime were previously raised in the dissent of then-acting director of the Federal Housing Finance Agency, Edward DeMarco, to the FSOC’s 7-2 vote on Prudential’s SIFI designation.

“To the extent that the Council has concerns about the potential for runs on standard products and existing regulatory scrutiny, those concerns would be better addressed by tools other than designation, such as the Council’s Section 120 authority,” DeMarco wrote in September in his dissent. Section 120 holds that FSOC may provide for more stringent regulation of a financial activity by issuing recommendations to the primary financial regulatory agencies to apply new or heightened standards and safeguards, including standards enumerated in section 115, for a financial activity or practice conducted by bank holding companies or nonbank financial companies under their respective jurisdictions, instead of blanketing the company itself with a SIFI designation.

FSOC’s plunge into the intense review of the asset management industry coupled with this apparent new tack doesn’t mean that MetLife is off the hook as a future SIFI, though, even though MetLife is a huge asset manager already.

The New York insurer, and one-time bank holding company, has been under Stage 3 review since mid-July 2013, likely the longest Stage 3 review thus far for a company.

If MetLife were cited as a SIFI on the same basis as Prudential, beginning with a distressed company and a run-on-the-bank by millions of policyholders and the ensuing contagion scenario, the oft-cited dissent from FSOC insurance expert Roy Woodall would probably be similar, which may be unpalatable to Treasury, even if the votes are there to designate MetLife.

At a hearing also this week on FSOC designations as a possible danger to the U.S. financial system, Woodall’s statement that FSOC’s “underlying analysis utilizes scenarios that are antithetical to a fundamental and seasoned understanding of the business of insurance, the insurance regulatory environment, and the state insurance company resolution and guaranty fund systems,” was quoted by Eugene Scalia of Gibson, Dunn & Crutcher LLP in Congressional testimony May 20.

Treasury probably wants to avoid listening to, over and over again refrains similar to, “the designation of Prudential purports to be based on a risk assessment, but a risk analysis that assesses neither the probability nor the magnitude of the event is not a risk assessment at all,” as stated by as Scalia in the Tuesday House Financial Services  hearing.

Also this week, House Financial Services Chairman Jeb Hensarling, R-Texas, called on FSOC to “cease and desist ” SIFI designations until it gets questions answered, and many are trying to push for greater FSOC transparency, so the FSOC bloom is off the rose, for now.

“Many think it odd that FSOC has chosen insurance companies and asset managers as targets for SIFI designation when there are others that pose far greater risks to financial stability.  Insurance companies are heavily regulated at the state level, and asset managers operate with little leverage. And since they manage someone else’s funds, it is almost inconceivable that an asset manager’s failure could cause systemic risk,” Hensarling stated.  

Treasury’s Miller also broached the  subject of the work of the Financial Stability Board (FSB) in ongoing work regarding the identification of global systemically important financial institutions. MetLife has already been identified as a global systemically important insurer (G-SII) by the International Association of Insurance Supervisors (IAIS), under the direction of the FSB, and some on Congress have expressed concern that a foreign body that is not a regulator is somehow directing domestic policy on U.S. capital and other standards. The NAIC, the state insurance regulators,  think the FSB mandate is so powerful, they want to be part of the group or its discussions.

Miller took the opportunity to try and allay these concerns.

“While the FSB and the Council have a shared objective of promoting financial stability, it bears emphasizing that the domestic and international processes are entirely independent.  In its work, the Council adheres to the standard and considerations for designations that are listed in the Dodd-Frank Act and in the Council’s public guidance,” Miller stated.

The Council is the only authority that can designate an entity for Federal Reserve Board supervision and enhanced prudential standards,” she stressed.

Concerns about dealing with so-called bank-centric capital standards themselves also had another airing when the Housing and Insurance Subcommittee of the Committee on Financial Services heard testimony on H.R. 4510, the legislative fix to the Collins Amendment in Dodd Frank that would free Federal Reserve-supervised insurers from preparing statements in accordance with GAAP and their assets and liabilities from the minimum leverage capital requirements and risk-based capital requirements required under Sen. Susan Collins’, R- Maine, now infamous Section 171.

 

Author: Liz Festa, in Washington, May 21, 2014