The confirmation of Jacob Lew as secretary of the Treasury late Wednesday clears the way for action on several issues critical to the insurance industry, including release of the long-delayed report on administration proposals for modernization of industry regulation.
At a hearing Wednesday, Rep. Gary Miller, R-Calif., vice chairman of the House Financial Services Committee, told Federal Reserve Board chairman Ben Bernanke that, "There's a tremendous amount of havoc in that [insurance] industry today because of what they don't know [about federal regulatory initiatives]."
What Miller was talking about are capital standards for insurers who operate thrifts as well as action by the Financial Stability Oversight Council (FSOC) on designation of the first nonbanks as systemically important financial institutions (SIFI).
Bernanke did tell Miller that the Fed understands that insurance companies are different from banks, but that it is constrained as to how it can regulate them differently by provisions of the law that mandated that they oversee nonbank SIFIs and thrift holding companies as well as pure banks.
He also said that the Fed was considering conducting a study of the potential quantitative impact of new capital rules on insurance companies before it finalizes them, but has made no final decision.
"We are discussing the feasibility of such a study and we recognize that there are important differences between banks and insurance companies," Bernanke told Miller.
"At the same time, of course, we have statutory constraints, the Collins amendment for example, that say that a certain amount of capital is necessary," Bernanke said.
But, he added, "we have also heard from Congress about this insurance/banking distinction and we're looking at it very seriously."
Bernanke also disclosed that the Fed has been "consulting" with state insurance regulators, with the Federal Insurance Office (FIO), with the industry, "with a lot of other stakeholders to make sure we understand these issues."
Lew is chairman of the FSOC. And, the Fed would oversee "significantly important financial institutions (SIFIs) and now has authority to oversee insurers who operate thrifts.
AIG and Prudential Insurance Co. of America have confirmed that they have been notified that they could potentially be designated as a non-bank SIFI, but those firms are still in a holding pattern, waiting for a final determination. MetLife likewise could be considered for non-bank SIFI designation, but to date has not received any formal notification that a designation may be in the works.
