For the first time in 150 years, an insurer will be federally regulated.

American International Group Inc. (AIG), one of the first three nonbank financial firms to be designated by the Federal Reserve Board as a systemically important financial institution (SIFI), says it will not challenge the new label.

In a July 2 statement, the insurer says it is "already working closely" with the Federal Reserve Bank of New York "as our regulator."

GE Capital says it too will accept the moniker but Prudential Financial says it plans to fight the SIFI tag, asking the FSOC to schedule a nonpublic evidentiary hearing on its appeal.

A Treasury spokesperson says the FSOC anticipates giving Prudential a hearing within 30 days. FSOC is required to vote again on the matter in 40 days to finalize the designations.

For more than a year AIG CEO Robert H. Benmosche has said the company has been preparing for, and welcomed, the designation, and was actively working with the Fed—a long-term relationship arising out of the financial crisis when AIG needed a government bailout to be saved from collapse.

In February Benmosche said, "We're running the company as if we will be [designated a SIFI]." More recently, in June, the CEO said, "This has been a long preparation time and the Fed has been with us now since September of last year," when government ownership of AIG fell below 50 percent and the Fed began regulating its thrift, which is based in Wilton, Conn.

A month ago the two insurers and GE Capital were informed of the FSOC's proposed determination that they are systemically important financial institutions. The companies were given 30 days to choose to accept the designation or challenge it.

The nonbank SIFIs would join banks that have earned the same label: Citigroup Inc., J.P. Morgan Chase & Co. and Bank of America Corp., as well as a several payment and clearing firms.

Any company designated as systemically important could be subject to higher capital levels and regular "stress tests" to ensure they can absorb losses, though the specific capital rules for insurers are far from complete.

Again, Benmosche appears ready. During the same June interview he said higher capital standards were warranted given the 2008 financial crisis and AIG would "adapt our earnings targets to have slightly more capital."

Special Reports /

AIG Won't Fight 'Systemically Important' Label; Prudential Requests Hearing

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