Lew Confirmation Could Clear Way for Delayed Federal Insurance Initiatives

Corrected 2/28, 4:00 p.m.

The confirmation of Jacob Lew as secretary of the Treasury late Wednesday clears the way for action on several insurance-related issues, including the release of a long-delayed report on insurance-regulation modernization.

Indeed, at a hearing Wednesday, Rep. Gary Miller, R-Calif., vice chairman of the House Financial Services Committee, told Federal Reserve Board chairman Ben Bernanke that, “There's a tremendous amount of havoc in that [insurance] industry today because of what they don't know [about federal regulatory initiatives].”

Miller was referring to capital standards for insurers that operate thrifts as well as action by the Financial Stability Oversight Council on designating non-banks as systemically important financial institutions (SIFIs).

Bernanke told Miller that the Fed understands that insurance companies are different from banks, but that it is constrained as to how it can regulate them differently by provisions of the Dodd-Frank law that mandated that the Fed oversee nonbank SIFIs and thrift holding companies as well as pure banks.

He also said that the Fed was considering conducting a study of the potential quantitative impact of new capital rules on insurance companies before it finalizes them, but has made no final decision.

“We are discussing the feasibility of such a study and we recognize that there are important differences between banks and insurance companies,” Bernanke told Miller.

“At the same time, of course, we have statutory constraints, the Collins amendment for example, that say that a certain amount of capital is necessary,” Bernanke said.

But, he added, “we have also heard from Congress about this insurance/banking distinction and we're looking at it very seriously.”

Bernanke also disclosed that the Fed has been “consulting” with state insurance regulators, with the Federal Insurance Office (FIO), with the industry, “with a lot of other stakeholders to make sure we understand these issues.”

Lew is chairman of the FSOC. And, the Fed would oversee “significantly important financial institutions (SIFIs) and now has authority to oversee insurers who operate thrifts.

AIG and Prudential Insurance Co. of America have confirmed that they have been notified that they could potentially be designated as a non-bank SIFI, but those firms are still in a holding pattern, waiting for a final determination. MetLife likewise could be considered for non-bank SIFI designation, but to date has not received any formal notification that a designation may be in the works. A Treasury Department spokesman declined comment. “I would refer you to our language in the interpretive guidance,” the spokesman said.

“The FSOC does not intend to publicly announce the name of any nonbank financial company that is under evaluation before a final determination with respect to such company,” the spokesman said.

Lew, 57, was confirmed by the Senate, 71-26. He is scheduled to be sworn in as Treasury secretary at 12:30 p.m. at the White House by Vice President Joe Biden, according to a statement from the White House.

Lew will immediately return to the Treasury Department from the White House to chair that meeting.

As for the report on insurance regulation, mandated under the Dodd-Frank Financial Services Modernization Act, the FIO, an agency within Treasury, was supposed to release it last January.

Industry officials surmised it was delayed in part because the White House and Treasury officials wanted a new Treasury secretary to sign off on it before it was released. Treasury officials have declined comment.

Lew would succeed Timothy Geithner, who announced last year that he would not serve as Treasury secretary during President Obama’s second term. Geithner now serves as a senior fellow at the Council on Foreign Relations in New York.

Lew brings different skills to the job than Geithner. Lew is a budget expert, and has served as budget director for both Obama and President Bill Clinton.

Geithner served as president of the New York Federal Reserve Bank before being named Treasury secretary in January 2009.

Corrected to show that MetLife had not received a formal notification regarding a possible SIFI designation.

Comments

Resource Center

View All »

Contractors General Liability Coverage 102

What is a prior work exclusion? Which option is right for my client? Why do...

Sign up today to get a 50% matching credit -...

Insurance marketing sometimes seems like it's a game of swings and misses, but we're here...

Guide: 5 Steps to Selling Cyber

Cyber risk and data security is on the agenda of every business owner and executive....

Citation Correlation

Do rigger and signalperson qualifications correlate with the cause of crane and rigging accidents? ...

Complete Guide to Electronic Signatures in Property & Casualty Insurance...

In property and casualty insurance, closing new business quickly is key. Learn how to leverage...

INSTANT ACCESS: Complimentary Sales Closer Questionnaires

Help property owners or managers compare your commercial residential property insurance coverage vs. the competition....

Determining Vacant Property Perils and Valuations

Are your clients fully covered for Vacant Properties? In this economic climate, your insureds may...

Risk Management for Law Firms

This package of 3 concise risk management articles offers straightforward content and practical suggestions law...

Guide: Top 15 E&O Risks-And How To Avoid Them

Accidents happen. But when it's an errors and omissions oversight, that accident can open your...

We'll Show You How to Reach Your Sales Goals

Whether you work alone or have a team of agents working for you, we can...

PropertyCasualty360 Daily eNews

Get P&C insurance news to stay ahead of the competition in one concise format - FREE. Sign Up Now!

Advertisement. Closing in 15 seconds.