NU Online News Service, March , 3:24 a.m.EDT

The Financial Services Roundtable wants the Treasury Departmentto use the Federal Insurance Office to coordinate allfederal-agency activities regarding insurance in order to ensurethat onerous and duplicative federal intervention in the insurancebusiness does not occur.

The FSR wrote a letter to Treasury secretary Timothy Geithnerthis week, which was obtained by NU Online News Service.

“Our hope is that the FIO will play a significant role, inconcert with other insurance experts on the Financial StabilityOversight Council, in ensuring that any new regulation imposed oninsurers is commensurate with the risk targeted for mitigation,”the letter says.

The letter was signed by Steve Bartlett, FSR CEO.

It was written after Geithner spoke at FSR's mid-winter forumfor members.

The letter was written just after the Federal Reserve Boarddecided after a stress test to bar MetLife from buying back stockor increasing its dividend.

MetLife was one of 19 large financial institutions to undergo astress test.

In his letter,Bartlettsays the FIO and Treasury should helpavoid the cost of any new federal or international regulationimpacting insurance companies that is inconsistent with anyreasonable risk presented by insurers or that imposes redundantregulation on matters already regulated by state-insurancedepartments or other agencies.”

Finally, FIO should help provide understanding as to the impactof the economic environment on insurers, as well as promote marketaccess and a balanced international-regulatoryarchitecture,Bartlettsays.

In its early stages, he says perhaps the most important role ofthe FIO, with the support of Treasury, will be to understand theimpact of the Dodd-Frank Act on the industry. New regulations andrequirements for some insurers—particularly those with insureddepositories—must be reconciled with the realities of the insurancebusiness.

“Specifically, insurers that own thrifts will now be subject todual regulation by the Federal Reserve and the states, and webelieve that the FIO should proactively assist these regulators indeveloping workable solutions, without imposing conflicting orduplicative requirements, as they fulfill their responsibilities,”according to the letter

More broadly, the letter says, “We recommend that the FIO serveas a resource and sounding board for any proposed federal statutesor rules that significantly affect the business of insurance.”

THE IMPACT OF METLIFE

Regarding MetLife, but without mentioning what happened by name,the FSR letter says, “We believe that the FIO can assist themembers of the Financial Stability Oversight Council in evaluatingthe unique risk characteristics of insurance companies, which arevery different than the risks associated with a bank-holdingcompany.”

Regarding the actions of the Fed indesignating insurers as systemically significant, the letter says,“The FIO and Treasury should assist the Federal Reserve inevaluating how these rules could impact the business model, capitalstructure and statutory-risk factors of insurance companies, in theevent any insurance groups are designated pursuant to suchrules.”

In the wake of the Fed action, Dave Jones,Californiainsurancecommissioner, issued a statement reaffirming that MetLife'slife-insurance group “exceeds insurance-financial-solvencyrequirements.”

Jones says, “I believe the Federal Reserve's 'stress test' isdirected primarily at non-insurer financial institutions and thenon-insurance operations of institutions with insurancesubsidiaries.”

He says the methodology utilized for analyzing and stresstesting banks is not intended to measure insurance solvency as thebusiness models are quite different.”

He adds, “While we are confident that Metropolitan LifeInsurance Group is financially strong, we will continue to monitorits insurance operations and protect the interests of insuranceconsumers.”

At the same time, Aite Group research director Clark Troy saysMetLife's failure of the Federal Reserve Bank's most recent stresstest “points out the double-edged sword of the post Dodd-Frankregulatory environment.”

Aite is based in Boston and has offices in the U.S. andoverseas.

Troysays, “MetLife is at pains to expedite the shedding of itsbank unit to a division of GE in order to keep it from beingdesignated a systemically important financial institution, or SIFI,which would make it subject to supervision by the Fed.”

Troysays some banks are headed in the opposite direction as theytry to replace income lost to regulation during the crisis bybulking up their insurance businesses, as witnessed by BB&T'srecent acquisition of insurance brokerage Crump Group.

Troysays there is “speculation” that Wells Fargo, BB&T'sprimary bank competitor in the insurance brokerage space, mayitself make a major insurance-brokerage acquisition.

“Which strategy will end up making sense is up forgrabs,”Troysays. “The track record of large-scalebancassurance in theU.S.is not encouraging, though BB&T andWells Fargo have done fine thus far with large brokerageoperations.”