Washington, D.C. (April 30, 2015)—Federal Reserve Board capital standards for insurers should be developed with stakeholder input and be appropriate for the business of insurance, an industry representative said today before a Congressional panel.

Prudential Financial Executive Vice President and Chief Financial Officer Robert M. Falzon offered these comments today on behalf of the American Council of Life Insurers (ACLI) and the American Insurance Association (AIA). He spoke before a hearing of the Senate Banking Securities, Insurance and Investment Subcommittee titled “Examining Insurance Capital Rules and FSOC Process.”

As authorized by the Dodd-Frank Act, the Federal Reserve Board is developing capital standards for insurers supervised by the Board either because they own depository institutions or have been deemed to be systemically important financial institutions (SIFIs).

“The insurance industry supports a formal rulemaking process with notice and public comment for the development of insurance capital standards to ensure that the Federal Reserve Board has the best information and input from public stakeholders,” Mr. Falzon said in his submitted comments. “The goal of this process should be the development of capital standards that are specifically designed and tailored for the insurance business model.”

Regarding the Financial Stability Oversight Council (FSOC) process for determining SIFIs, Mr. Falzon called for reforms that include “improved procedures for de-designation and increased consideration of the views of primary insurance regulators. These reforms would strengthen the FSOC and its regulatory goals of identifying and diminishing systemic risk.” 

An insurer should have the opportunity to request a review of their SIFI status by FSOC. And during the review, “FSOC should be required to provide a company with an analysis of the factors that would lead FSOC to de-designate a company. This would lead a company to know precisely what changes in its operations or activities are needed to eliminate any potential for the company to pose a threat to the financial stability of the United States.”

Mr. Falzon’s full testimony

The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association with approximately 300 member companies operating in the United States and abroad. ACLI advocates in federal, state, and international forums for public policy that supports the industry marketplace and the 75 million American families that rely on life insurers’ products for financial and retirement security. ACLI members offer life insurance, annuities, retirement plans, long-term care and disability income insurance, and reinsurance, representing more than 90 percent of industry assets and premiums. Learn more at www.acli.com.