NAIC, industry groups support MetLife in federal case

Moreover, the Chamber and ICI brief said, the FSOC's decision to forgo any threshold analysis of MetLife's supposed vulnerability to financial collapse and instead to "assume material financial distress" in considering MetLife for SIFI designation was inconsistent with the analysis "clearly contemplated" by the terms and structure of a provision of the Dodd-Frank Act (DFA). The DFA was the 2010 law that created a process for designating non-bank financial institutions as systemically significant.

The Chamber and ICI brief also contended that the FSOC's approach to designation "leaves the sheer size of an entity and the extent of its corporate or customer relationships as the only meaningful factors in a SIFI determination, and "that arbitrary result is incompatible with the balanced goals of the Dodd-Frank Act."

In its brief, the ACLI said that MetLife "convincingly demonstrates" why its designation as a SIFI by the FSOC was arbitrary and capricious as well as "unsupported by the record, empirical fact, or economic logic; and contrary to law."

The ACLI also said that the FSOC in designating MetLife failed to account for the basic differences between banks, on the one hand, and insurance companies, on the other, including differences in the products offered, the liabilities assumed, and the economic risks respectively faced by banks and insurers.

"Bedrock principles of reasoned decision making under the Administrative Procedure Act required the FSOC both to identify and account for the differences between these two very different types of financial institutions," the ACLI said. Instead, the FSOC "glossed them over, effectively assuming that banks and insurance companies were alike, when, in fact, they differ."

In its brief, the NAIC said that in designating MetLife, the FSOC "failed to adequately consider the full range of regulatory tools available to state regulators at the individual entity and group level."

The NAIC also contended that in designating MetLife, the 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 — tools used by state regulators in overseeing insurers.

Moreover, the NAIC said in its brief, the FSOC failed to assess the risk of MetLife's ultimate failure "against the deliberate, incremental process that applies to troubled companies supervised by state insurance commissioners."

See also:

What Does it Mean to be SIFI?

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