WASHINGTON — David A. Sampson, president and CEO of the Property Casualty Insurers Association of America (PCI) issued the following statement in response to the Financial Stability Oversight Council’s (FSOC) decision today to de-designate AIG as a nonbank systemically important financial institution (SIFI).
“The overwhelming consensus among insurance experts is that traditional insurance activities are not systemically risky.
“Designating a handful of insurance companies as SIFIs and subjecting them to bank-like federal regulations and capital requirement does nothing to reduce true systemic risk and instead drives up the cost of financial protection products and services.
“PCI has long encouraged regulators to focus on truly systemically risky activities rather than punishing financial companies simply for being large. By focusing on such systemically risky activities instead of company designations, policymakers and regulators have more flexibility to quickly respond to changing market conditions, addressing excessive risk wherever it manifests.
“Under an activities-based approach, FSOC members would convene to identify potential systemic risks and allow the primary functional regulators to determine how to best regulate those risks. This was the approach adopted for the asset management industry and it is equally appropriate for the insurance industry.
“An activities-based approach allows for effective and tailored regulation by keeping regulatory and supervisory authority with the primary regulator – state insurance regulators in the case of insurers – instead of federal banking regulators.
“PCI applauds FSOC’s announcement and looks forward to continuing to reform the Dodd-Frank Act and better target regulation to benefit consumers and the marketplace.”