NU Online News Service, Feb. 10, 9:01 a.m.EST

WASHINGTON—Trade groups representing the life, property andcasualty, and reinsurance industries are asking the TreasuryDepartment to defer indefinitely federal oversight of institutionsdeemed systemically risky.

Before institutions are classified as posing a systemic risk tothe financial system under the Dodd-Frank Act, the trade groupssaid in a letter to Treasury, a whole host of issues must beclarified to their satisfaction.

The trade groups are the American Council of Life Insurers; theAmerican Insurance Association; and the Reinsurance Association ofAmerica.

They said classification of insurers should be delayed until twokey positions are filled. The first is the independent member ofthe Financial Stability Oversight Council (FSOC) who has insuranceexperience, nominated by the president and confirmed by the Senate.Second is the director of the Office of the Federal InsuranceOffice, who is selected by the Treasury secretary.

They are also suggesting that any FSOC action involving insurersbe delayed until the agency has proposed qualitative andquantitative standards that it may use to assess carriers. Theyalso said it should be delayed until the agency has provided theinsurance industry and the public with an opportunity to comment onsuch standards.

"Ensuring that the appropriate insurance expertise is in placeto inform the rulemaking and providing a transparent process thatallows for public comments on the quantitative and qualitativestandards that will be applied by the FSOC are necessary componentsto the successful implementation of these critical provisions ofthe Dodd-Frank Act," the letter said.

The letter was signed by Julie A. Spiezio, ACLI senior vicepresident and deputy general counsel; J. Stephen Zielezienski, AIAsenior vice president and general counsel; and Tracey Laws, RAAsenior vice president and general counsel.

The lawyers said that their trade groups are "concerned" that,notwithstanding the extensive comments provided to the FSOC inresponse to an October request for comment, "nothing in the actuallanguage of the proposed rule provides non-bank financial companieswith any guidance as to the standards that the FSOC intends toapply in carrying out its functions to determine whether or not tosubject a financial company to the board's supervision and toenhanced prudential standards."

The letter added that the FSOC's failure to provide meaningfulstandards that it will apply in making its assessments as tosystemically important institutions "is particularly troubling" inview of the statement that it expects to begin assessing thesystemic importance of non-bank financial companies under theproposed framework shortly after adopting a final rule.

"It is difficult to provide comprehensive comments on the FSOC'sproposed rule without having the opportunity to review and commenton the metrics the FSOC states it will rely upon, as well as theconceptual foundations that underlay its judgment," the lettersaid.

 The letter added, "We do not believe that theinsurance members on the FSOC who are awaiting appointment shouldtake a backseat to members who have already been designated.Accordingly, we strongly believe that it would be contrary tocongressional intent and do a disservice to the FSOC and to theinsurance industry for the FSOC to proceed without the fullcomplement of members who are able to provide critical input to theFSOC and participate in the FSOC's important decisions that willaffect the insurance industry long into the future."