The Financial Stability Oversight Council was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in 2010 in response to the financial crisis. The body is charged with monitoring systemic risk to the U.S. economy by identifying risks and closing regulatory gaps. It is made up of ten voting members - nine representatives from federal financial regulatory agencies and an "independent member with insurance expertise" = and five nonvoting members, including the Director of the Federal Insurance Office, and a state insurance commissioner selected by the state insurance commissioners.
One of the more controversial authorities given to the FSOC was to designate non-bank financial companies - including insurers - as Significantly Important Financial Institutions. While no traditional property/casualty insurance companies have been as-yet designated as a SIFI, many life insurance companies have been given the designation. Since 2010, the FSOC has voted to designate four companies as SIFIs: American International Group, Inc., General Electric Capital Corporation, Inc., Prudential Financial, Inc., and MetLife. General Electric was the first of these entities to sell most of its lending business to de-risk and no longer be deemed a SIFI by the FSOC, which has not yet occurred.
There is widespread concern that the insurance voices on the FSOC are being ignored in the designation process. In two cases, Prudential and MetLife, the independent member with insurance expertise and the state insurance commissioner both raised objections to designation, but they were ultimately overridden by the other 9 voting members.
NAMIC remains very concerned with the potential for any property/casualty insurer to be designated by the FSOC as a SIFI. We believe that any fair analysis of our industry clearly shows that the nature of property/casualty insurance is unique and does not - indeed cannot - pose a systemic risk to the economy.