FSOC - Financial Stability Oversight Council
- 2015 03 - The Financial Reporter, Society of Actuaries - 20p
- Financial Stability Oversight Council Meeting
- [VIDEO-CSPAN]
- 16:30 - John Huff (Missouri Insurance Regulator / NAIC)
- Traditional Insurance products don't create Systemic Risk, however..."
2015 0429 - GOV (House) - The Impact of International Regulatory Standards - [PDF-125p, part 1 - VIDEO-youtube , Part 2 - VIDEO-youtube]
(p19) - Mark Van Der Weide - (Deputy Director, Division of Banking Supervision and Regulation, at the Federal Reserve Board of Governors)
The FSOC publicizes a summary of its decision whenever it designates a non-bank SIFI.
- And that was true as well for the three insurance non-bank SIFIs that the FSOC has designated.
They have also put out a public framework to describe the factors that they used to assess whether a particular non-bank financial firm is a SIFI.
- And those procedures were followed in the process that led to the designation of the three U.S. insurers as non-bank SIFIs.
I think the FSOC recognizes that traditional insurance activities tend to generate low amounts of systemic risk.
- But there are a fair amount of nontraditional insurance activities that are engaged in by those three firms, and those did generate some amounts of systemic risk.
- Some of the key factors that were cited in the FSOC’s decisions included:
- the extent of short-term funding activities at those organizations,
- the extent of their capital markets activities— repos, securities, lending, OTC derivatives—which create interconnectedness with the rest of the financial system,
- and also the runnable liabilities of some of those firms embedded in their insurance or annuities products, which would enable the annuitant or the insurance policyholder to potentially take out its money from the firm on short notice.
- But those are some of the factors that...
Billing Code 4810-25-P
FINANCIAL STABILITY OVERSIGHT COUNCIL
12 CFR Part 1310
RIN 4030-ZA00
Authority to Require Supervision and Regulation of Certain Nonbank Financial - 98p
2014 0204 - The Federal Insurance Office’s Report on Modernizing - [PDF - 214p, VIDEO - YouTube]
- (p12) - Mr. MCRAITH. The decision by the Council stands. Whether Roy Woodall or Director Huff disagree is fundamentally of interest to the Council. Council members did not find their views persuasive.
- Chairman NEUGEBAUER. I think the concerning thing to me is that the voting members who had expertise in the insurance industry and had expertise in the regulatory structure voted against that. And is that basically the way the structure of FSOC is now, that as we begin to move forward with some of these other insurance companies, this is going to be a trend in that the people who have expertise in that area are going to be overridden by the people who want to impose some more bank-like regulatory structure on these entities?
- Mr. MCRAITH. The FSOC process is a thorough process that involves, again, many very smart people with different perspectives—
- Chairman NEUGEBAUER. I know. You said that before. But I am not interested in your opinion of whether those people are smart or not. I am really interested in your opinion of, do you think this is a troubling scenario that the people who know something about—or does that trouble you; that is a yes-or-no question. Yes, it troubles you, or no, it doesn’t.
- Mr. MCRAITH. It doesn’t trouble me because smart people can disagree.
For the designated insurance companies, the Council’s analyses recognized that some products, such as term life insurance policies and payout annuities, are relatively stable because they do not accumulate a cash value that can be withdrawn at the discretion of the policyholder.
- However, the Council’s analyses noted that other life insurance and annuity liabilities, including certain investment-oriented products such as fixed deferred annuities, build cash value over time that may be withdrawn by the policyholder with little or no penalty.
In the case of each of the three designated insurance companies, the Council focused on the potential for asset liquidation to be triggered through the early withdrawal or surrender of the company’s life insurance, annuity, and retirement products.
The Council considered factors that could make policyholders reluctant to surrender their contracts, including surrender penalties and potential tax consequences.
- Despite these considerations, the Council noted that policyholder behavior might deviate from expectations in the event of a company’s material financial distress, such that even “less-liquid” liabilities could be subject to material surrenders, as policyholders could be willing to incur substantial costs in order to reduce their exposure to the failing insurer. (p57)
2017 1117 - FSOC - Financial Stability Oversight Council Designations - REPORT TO THE PRESIDENT OF THE UNITED STATES - Pursuant to the Presidential Memorandum Issued April 21, 2017 - 68p
- H.R. 4248, the FSOC Designation Review Act.
- Financial Market Regulation - (Introducing FSOC) - Paulson
- [VIDEO-CSPAN]
- 28:00 - Modernizing Insurance - Optional Federal Charter - Housed in the Treasury Department
- FSOC, OTS
- 2011 0225 - American Academy of Actuaries to FSOC - Re: Authority to Require Supervision and Regulation of Certain Non-Bank Financial Companies (12 CFR Part 1310) - Jesse M. Schwartz - Chair, Financial Regulatory Reform Task Force -American Academy of Actuaries - 8p
- Potential Vulnerability Metrics
- 1. Regulatory Scrutiny - The evaluation of
existing regulatory scrutiny also includes the preparedness to supervise new and evolving, substantial, and rapidly growing risks. (p4) - 2. Quantitative Metrics - Interconnectedness, Leverage, Short-term Funding - Reinsurance (p5)
- 3. Qualitative Metrics - The extent of financial product guarantees, beyond the guarantees provided in traditional insurance industry products. (p6)
- The low interest rate environment poses it significant challenge for life insurers with sizable blocks of liabilities incorporating embedded interest rate guarantees, such as annuities or universal life insurance policies. (p141)
2012 - FSOC - Annual Report - 225p
- 2012 - GOV - THE ANNUAL REPORT OF THE FINANCIAL STABILITY OVERSIGHT COUNCIL - [PDF-294p, VIDEO-CSPAN] - Geithner
- 2014 11 - GAO - Financial Stability Oversight Council : Further Actions Could Improve the Nonbank Designation Process - 76p
- content.naic.org/index_financial_reform_fsoc.htm
- NAIC FSOC Members
- John Huff (MO), Adam Hamm, Peter Hartt (NJ),Eric A. Cioppa (ME)
- NAIC FSOC Members
- Patrick Pinschmidt
- home.treasury.gov////fsoc
-
Federal Advisory Committee on Insurance (FACI)
- [LINK
-
- regulations.gov/docket/FSOC_FRDOC_0001/document
- fraser.stlouisfed.org/title/minutes-financial-stability-oversight-council-5160?browse=2010s
On Dec. 19, 2014, FSOC announced its decision to designate MetLife a SIFI. The decision was accompanied by a 30-page legal paper titled, “Basis for FSOC’s Final Determination Regarding MetLife, Inc.”3
While the paper is couched in terms of legal support for the determination, it offers discussion and insight into FSOC’s thinking on many of the top risk issues for insurers, not just MetLife:
• Funding agreements, GICs, and synthetic GICs;
• Securities lending;
• Captive reinsurers; and
• Variable annuities.
The paper also discusses issues specific to the size and
risk footprint of SIFIs, and how disruption at a SIFI can
spread to threaten U.S. financial stability:
• Risk transmission: spread of financial losses;
• Critical function and service issues; service disruptions to significant clients; and
• Resolvability: how the sheer size and complexity of a SIFI could hinder or help the ability to resolve its estate.
MetLife still has many legal options,....
2015 03 - The Financial Reporter, Society of Actuaries - 20p
- 2013 0405 - Federal Register - govinfo.gov/content/pkg/FR-2013-04-05/pdf/2013-07688.pdf
- FEDERAL RESERVE SYSTEM - 12 CFR Part 242
[Regulation PP; Docket No. R–1405] - RIN 7100–AD64 - Definitions of ‘‘Predominantly Engaged In Financial Activities’’ and ‘‘Significant’’ Nonbank Financial Company and Bank Holding Company
- AGENCY: Board of Governors of the Federal Reserve System (‘‘Board’’).
- ACTION: Final rule.
- FEDERAL RESERVE SYSTEM - 12 CFR Part 242
- 2015 0428 - GOV - The State of the Insurance Industry and Insurance Regulations
- 2015 0430 - GOV - Examining Insurance Capital Rules and FSOC Process - S. Hrg. 114-94
- [PDF-70p, VIDEO-CSPAN]
- Senate - Banking, Housing, and Urban Affairs Committee
- 2019 0314 - GOV - Financial Stability - Oversight Council Nonbank Designation
- 2019 1205 - Promoting Financial Stability? Reviewing the Administration’s Deregulatory Approach to Financial Stability"- [Video-Youtube]
- The FSOC's Designation Program as a Case Study
of the New Administrative Law of Financial
Supervision, Robert F. Webert - 88p
- 2018 0212 - CRS - Financial Stability Oversight Council (FSOC) Structure and Activities - 17p
- Minutes of the Financial Stability Oversight Council
- Systemic Risk Committee
- Federal Advisory Committee on Insurance (FACI)
- Committee on Banking, Housing, and Urban Affairs - Crapo
- 2017 - Financial Stability Oversight Council Insurance Member Continuity Act
- Insurance Experts -
- FIO
- Independent
- Roy Woodall
- Thomas Workman
- NAIC
- FSOC
- Amias Gerety
Department of the Treasury
Annual Report
With U.S.Treasury Secretary Tim Geithner due to address the House Financial Services Committee, July 25, on the annual report of the Financial Stability Oversight Council (FSOC), a Dodd-Frank Act requirement, expect some cautionary words about the health of the insurance industry and concerns surrounding the euro.
The low interest rate environment poses a significant challenge for life insurers with sizable blocks of liabilities with promised interest rate guarantees found in annuities or universal life insurance policies, the recently-released annual report written by FSOC members warns.
"The low interest rate environment has proved challenging for life insurers to generate sufficient investment returns to meet high guaranteed benefits promised in prior years," the FSOC report stated.
2012 0401 - National Underwriter - [LINK]