Posted on 04 Jun 2013 by Neilson
J. Stephen (Stef) Zielezienski, senior vice president and general counsel for the American Insurance Association (AIA), issued a statement in response to the Federal Stability Oversight Council's (the Council) designation of "an initial set" of nonbank financial firms as "systemically important financial institutions" (SIFIs).
The Council, which was granted SIFI rulemaking and designation authority under the Dodd-Frank Act, voted to designate the firms as SIFIs at its meeting today. SIFI designation enables the Federal Reserve Board to require increased levels of capital and supervision of these firms. The respective firms, whose names have not been released, have 30 days to challenge the designation and request a hearing. Barring a challenge, the Council has 40 days from today to undertake a second vote to finalize SIFI designation.
Mr. Zielezienski's statement follows:
"AIA maintains the position that property-casualty insurers engaged in regulated insurance activities do not pose a threat to financial stability and therefore should be screened out of the SIFI designation process. As we have stressed all along, AIA believes that if members of the Council correctly apply risk-related factors, they will conclude that property-casualty insurers are not the types of companies that should be subjected to heightened prudential supervision. The industry business model, the supporting regulatory architecture, the large number of competitors, and conservative management and investment practices employed in the property-casualty insurance industry help reinforce that conclusion.
"AIA hopes that the Council will continue to use the designation sparingly and apply it only to the companies that pose a systemic threat to U.S. financial stability."