Insurance Industry Blasts MetLife’s Preliminary SIFI Designation
September 10, 2014 by Jeff Jeffrey
WASHINGTON – Representatives of the U.S. insurance industry are roundly criticizing the decision by the Financial Stability Oversight Council to issue a preliminary systemically important financial institution designation to MetLife Inc.
The American Council of Life Insurers issued a statement shortly after the FSOC’s decision was handed down, saying the organization was “extremely disappointed” by the preliminary SIFI designation. “ACLI’s position on this and other life insurer SIFI designations is clear: No single life insurer poses a systemic risk to the U.S. economy,” the organization said.
The ACLI said life insurers in the United States must adhere to strict state solvency laws and regulations that ensure they are able to meet their commitments. These standards appropriately reflect the long-term financial obligations of life insurance companies, the ACLI said.
“Any new standards imposed on any life insurer should take into account the strong regulatory and solvency regime that already exists,” ACLI said. “Applying bank-centric capital standards would not be appropriate.”
The Property Casualty Insurers Association of America also came out against the preliminary designation, reiterating the organization’s opposition to SIFI designations for property/casualty companies. PCI said Congress should act to ensure the FSOC does not impose SIFI designations on other insurers.
“Regulators and other expert commentators have concluded that property and casualty and other traditional insurance activities do not pose a systemic risk,” PCI said in an email. “Nothing in this decision changes that.”
PCI added some non-insurance activities may trigger a determination of systemic risk for an institution, “such a determination does not alter the fact that property and casualty and other traditional insurance activities do not give rise to systemic risk.”
The FSOC’s decision also drew criticism from Rep. Randy Neugebauer, R-Texas, who chairs the House Financial Services Committee’s Subcommittee on Insurance.
Neugebauer called the FSOC’s decision “reckless” and said Congress should increase its oversight of the council.
“FSOC’s flaws have once again surfaced with the designation of another non-bank financial institution as a SIFI,” Neugebauer said in a statement. “This designation ignores the market realities of the insurance industry and its business model. Only regulators in Washington could come to this conclusion. All the more troubling, FSOC remains unwilling to lift its veil of secrecy and refuses to even disclose the reasoning behind this decision.”
The FSOC voted unanimously to issue a preliminary designation during a Sept. 4 closed-door meeting. One FSOC member voted present (Best’s News Service, Sept. 4, 2014).
MetLife Inc. Chairman, President and Chief Executive Officer Steven A. Kandarian said the company “strongly disagrees” with the FSOC’s vote. The company is not ruling out any of the available remedies under Dodd-Frank to contest a SIFI designation, he said in a statement.
Companies that receive a SIFI designation are subject to additional regulatory oversight by the Federal Reserve Board.
MetLife has 30 days to request a hearing before the Council to contest the proposed determination.
If MetLife’s designation becomes final, it will join American International Group Inc. and Prudential Financial Inc. as the only other insurance companies to be named SIFIs.
