Implausible Scenario - Metlife - FSOC

  • 2015 0626 - 15-cv-45 - NAIC - Document 43 - NAIC - Consent Motion of the National Association of Insurance Commissioners for Leave to File Brief as Amicus Curiae in Support of Plaintiff Metlife. - 32p
  • 2014 12 - re: FSOC SIFI Designation of MetLife, Woodall / Hamm - Views of the Council’s Independent Member Having Insurance Expertise - 13p  --  <BonkNote>
    • Adam Hamm - the State Insurance Commissioner Representative
    • Roy Woodall - FSOC Member - Independent Insurance Expert

Roy Woodall - FSOC Member - Independent Insurance Expert

  • I do not believe that the analysis’ conclusions are supported by substantial evidence in the record, or by logical inferences from the record.
    • The analysis relies on implausible, contrived scenarios as well as failures to appreciate fundamental aspects of insurance and annuity products, and, importantly, State insurance regulation and the framework of the McCarran-Ferguson Act.2

2014 12 - re: FSOC SIFI Designation of MetLife, Woodall / Hamm - Views of the Council’s Independent Member Having Insurance Expertise - 13p  --  <BonkNote>

2014 12 - re: FSOC SIFI Designation of MetLife, Woodall / Hamm - Views of the Council’s Independent Member Having Insurance Expertise - 13p  --  <BonkNote>

View of Adam Hamm, the State Insurance Commissioner Representative

  • (p10) - 4. A key consideration for the final designation is the asset liquidation channel.
    • The final Basis, like the proposed Basis, continues to offer merely speculative outcomes related to the liquidation of assets based in large part on hypothetical and highly implausible claims of significant policyholder surrenders.
  • (p11) - Even assuming the Council’s asset liquidation analysis was appropriate otherwise, it does not take into account the impact of regulatory intervention as described above.
    • This is exacerbated by the Council’s failure to appreciate the historical effectiveness of the insurance regulatory system in crisis.
    • For example, in response to the arguments by MetLife seeking to analogize the impacts of a failure of MetLife to other insurance company failures in history, the Council notes correctly that the failure of an insurance company of MetLife’s size and scope has never taken place.
    • While that is a fair statement as each company has its own unique characteristics, the fact that there is no comparable insurance failure is a testament to the state insurance regulatory system, a fact that the Council ignores.

(p10) - B. FSOC failed to assess the risk of asset liquidation against existing regulatory authority to actively prevent a “run on the bank” scenario, including early warning through risk-based capital requirements and stays on surrender activity.

  • FSOC continues to raise the specter of a “run” on a large insurer by policyholders, which could throw a troubled company (and apparently the life insurance industry) into full-blown insolvency seemingly overnight.
  • The practical aspects of insurance products, particularly in the area of life insurance, simply don’t support these fears.
  • (p14) - FSOC’s scenario of mass surrenders and withdrawals by MetLife policyholders assumes, with no evidence or historic precedent, that state regulators would not act to prevent the financial distress of an insurer and then would sit idly by as these unprecedented events occurred.
  • In its designation, FSOC managed to create a scenario where declining to issue a stay or deciding to issue a stay would have equally disastrous consequences, suggesting that “the imposition of a stay on discretionary withdrawals could cause a loss of confidence, particularly if other insurers are simultaneously experiencing some level of financial distress.”
    • Final Designation at 144-145.
  • Again, FSOC’s analysis is stripped of meaning when it assumes any decision a state regulator might make to be too little, too much, too soon or too late.
  • (p15) - These resources and the record of success for coordinated responses clearly demonstrate
    that the fear of “contagion” resulting from a run on insurer assets is greatly overstated

2015 0626 - 15-cv-45 - NAIC - Document 43 - Consent Motion of the National Association of Insurance Commissioners for Leave to File Brief as Amicus Curiae in Support of Plaintiff Metlife, Inc. - 32p