A credit analyst says one big, hard-to-predict threat facing U.S. life insurers could be an agency that's supposed to reduce financial system risk: the Financial Stability Oversight Council.
Peter Troisi, Barclays' senior credit analyst for high-grade U.S. banks and insurers, named FSOC as a possible source of "black swan" risk earlier this week during a panel discussion at an insurance conference in New York City organized by S&P Global Ratings.
In April, FSOC proposed reversing a decision it made in 2019 to narrow the scope of its efforts to monitor and supervise "systemically important financial institutions" other than banks, or SIFIs.
"We don't know how it will go this time around," Troisi said. "It seemed punitive last time. I think it is probably not on many people's radar."
What It Means
One possible threat to the issuers of your clients' life insurance policies and annuities, and to their investment portfolios, could be the side effects of FSOC's meltdown prevention activities.
FSOC Basics
Congress created FSOC in response to the 2007-2009 Great Recession.
Federal financial services regulators said at the time that they felt that they understood the problems at banks and in the securities industry but had a hard time tracking potential threats at financial institutions such as life insurance companies and nonbank consumer lending firms.
