Standard & Poor’s released its own report which found that the act, which targets financial services reform, is not expected to affect insurers’ credit quality, except for the provision that would assess a fee to insurers designated as systemic risks. The fee, which had not previously existed for large insurance companies or nonbank financial firms, is designed to help the government pay for its new authority to unwind large, distressed firms.
AIG declined to comment on the impact of such a designation.
But Evan Greenberg, CEO of ACE Ltd., said he doesn’t have much confidence in a systemic regulator. “When I look back at the [credit] crises and I look at the role that current regulators played or didn’t play in recognizing accumulations of risk and bad underwriting in the credit business, it doesn’t give me a whole lot of encouragement about how regulators will behave in the future,” Greenberg said.
Speaking to potential problems with regulating systemic risk, A.M. Best Co. said, “Questions abound as to the potential cost of regulating systemic risk for U.S. financial institutions; in particular, if other major countries do not follow the U.S. in controlling systemically important institutions and market utilities, the end result would be uneven regulation among different national systems.”