On October 25, 2013, the Board of Governors of the Federal Reserve System (the “Board”) applied for membership with the International Association of Insurance Supervisors (“IAIS”), a voluntary membership organization of insurance supervisors and regulators from nearly 140 countries. The mission of the IAIS is to promote globally consistent supervision of the insurance industry. According to industry sources, the Board is also seeking inclusion on the Executive Committee of the IAIS.
In its application, the Board detailed how it may regulate an insurance company or a company that owns or controls an insurance company, because such a company owns or controls certain types of banks or savings associations or is designated as a systemically important nonbank financial company by the Financial Stability Oversight Council (“FSOC”). To date, FSOC has designated two insurance firms under this authority: American International Group, Inc. and Prudential Financial, Inc.
Certain industry members oppose the Board’s application. According to Michelle Rogers, the Financial & Regulatory Director of the National Association of Mutual Insurance Companies (“NAMIC”), “NAMIC does not agree that the [Board]’s role in supervising some aspects of a few insurance companies warrants a seat at the table at the IAIS.”
Others are concerned that the Board may attempt to steer regulation of the insurance industry in a similar manner that it does for banking, which may be less transparent. According to media sources, Dave Snyder, Vice President of International Policy at the Property Casualty Insurers Association of America, is concerned how the Board may borrow standards from the banking industry that may end up creating additional risks for insurers instead of relying on “time-tested” insurance regulations used by state regulators. According to Mr. Snyder, “applying bank-centric standards to insurance is like giving an experimental drug to a healthy patient.”
If admitted to the IAIS, the Board will join the Federal Insurance Office (part of the United States Department of the Treasury) as the second U.S. federal insurance regulator that is a member. The National Association of Insurance Commissioners and 56 U.S. jurisdictions are also members.