FOR IMMEDIATE RELEASE
NAIC WEIGHS IN ON FSB SYSTEMIC DESIGNATIONS
WASHINGTON, D.C. (July 18, 2013) — The following is a statement from Thomas B. Leonardi, Connecticut Insurance
Commissioner, on the list of Global Systemically Important Insurers
released by the Financial Stability Board (FSB). Leonardi represents state
insurance regulators at the Financial Stability Committee at the
International Association of Insurance Supervisors (IAIS).
The National Association of Insurance
Commissioners (NAIC) recognizes the important work being conducted by the
Financial Stability Board (FSB) to address systemic threats to the global
financial system. Nevertheless, we are concerned that FSB's identification
of globally systemically important insurers (GSIIs) today is premature to
the extent it relies solely on the work of the International Association of
Insurance Supervisors (IAIS).
The IAIS agreed on a quantitative methodology
which produces a relative ranking of firms based on metrics thought to be
relevant for determining systemic importance. However, in our view, the
analysis conducted to date by the IAIS is not sufficient by itself to draw
the conclusion that any or all of the firms on the list are GSIIs.
Further, we continue to believe that
traditional insurance activities are not systemically risky. Therefore, we
urged that a comprehensive comparison of GSIIs with proposed systemically
important banks be conducted to assess the threat posed by potential GSIIs
relative to financial firms in other sectors. In other words, understanding
whether the most systemically risky insurer (by virtue of its
nontraditional or noninsurance activities) is still less risky than the
least systemically risky bank, is relevant before making a designation and
recommending additional requirements that will bifurcate the market.
Despite having the largest number of GSIIs
within our jurisdictions, U.S. state insurance regulators have little
insight into the deliberations at the FSB, so it is unclear whether other
information beyond the IAIS work was considered. Mitigating systemic risk
is an objective all financial regulators share, but given the impact of
this effort on financial firms and their customers and the potential for an
unlevel playing field in otherwise competitive and healthy insurance
markets, it is important to get this right.