Washington, D.C., (July 8, 2015) – The Financial Stability Board (FSB) and Financial Stability Oversight Council (FSOC) need to hold all nonbank financial companies to the same standard when assessing whether they should be designated as systemically important, the American Council of Life Insurers (ACLI) testified today before the U.S. Senate Banking Committee.

ACLI President and CEO Dirk Kempthorne testified at the committee hearing titled, “The Role of the Financial Stability Board in the U.S. Regulatory Framework,” that the FSB and FSOC have treated insurance companies differently than other financial services industries.

“While FSB and FSOC have designated three U.S. insurers for heightened supervision and regulation, they are pursuing an ‘activities-based’ approach for asset managers rather than the imposition of heightened regulation on individual companies merely because of size,” Governor Kempthorne testified.

Governor Kempthorne also testified about the need for the Federal Reserve Board to develop an appropriate capital standards regime for U.S. insurers before agreeing to international capital standards from the International Association of Insurance Supervisors (IAIS).

Governor Kempthorne provided several recommendations:

• FSOC should utilize an activities-based approach to identifying systemic risk rather than designate individual companies based merely on size;
• The Federal Reserve Board should finalize the capital standards mandated by Congress last year in a manner that is consistent with the Insurance Capital Standards Clarification Act before agreeing to capital standards developed by the IAIS; and
• The Senate Banking Committee should exercise vigorous oversight of the capital standard-setting process by the Federal Reserve Board and the U.S. regulators on IAIS to ensure that the intent of Congress and the competitiveness of the U.S. insurance industry is preserved.

In addition, Governor Kempthorne commended the Senate Banking Committee and its Chairman Richard Shelby (R-Ala.) for The Financial Regulatory Improvement Act of 2015.

“The Financial Regulatory Improvement Act reflects many of the principles of transparency, accountability, and due process that are supported by ACLI and its member companies,” he said. “ACLI urges the Committee to move this important legislation to the full Senate for consideration.”

Governor Kempthorne’s full testimony is available here.