The American Council of Life Insurers (ACLI) is urging Congress to repeal the Financial Stability Oversight Council’s (FSOC) authority to designate insurers as systemically important financial institutions (SIFIs).
It was one of several ideas ACLI President and CEO Dirk Kempthorne recommended to promote economic growth in a letter to Senate Banking, Housing and Urban Affairs Committee Chairman Mike Crapo (R-ID) and Ranking Member Sherrod Brown (D-OH).
“The designations of insurers were largely dependent on banking expertise, not insurance expertise. FSOC’s decisions with regard to insurers were bank-centric and not grounded in an accurate understanding of the business of insurance,” Kempthorne said.
He also said FSOC’s role in identifying macro-prudential risks should be re-emphasized.
“FSOC’s narrow focus on a few individual entities in certain sectors has diverted attention and resources away from its more important role as a broad-sighted macro-prudential overseer of the economy that can identify potential systemic risk in a timely fashion,” Kempthorne said.
Kempthorne also believes FSOC’s insurance regulatory expertise should be increased.
“FSOC’s structure should be changed, including adding state insurance regulators as voting members. FSOC’s actions to date reflect its dominance by bank regulators, discounting the opinions of the single insurance expert voting member, resulting in erroneous and harmful decisions affecting insurance companie,” he said.
Kempthorne expressed his support for the covered agreement on insurance and reinsurance that U.S. and European regulators seek to put U.S. insurers on equal footing with their European counterparts in Europe.
“The covered agreement on insurance and reinsurance strengthens the competitiveness of U.S. insurers and allows U.S. capital to be invested in the economy and put to work here in the U.S. In the absence of the bilateral covered agreement, U.S. companies operating in the EU would be compelled to export and sideline capital to meet costly, duplicative EU regulations,” he said.