The Financial Stability Oversight Council (FSOC) designated AIG as a Systemically Important Financial Institution (SIFI) after determining that “material financial distress at AIG could pose a threat to U.S. financial stability.”
Executive Summary
One may debate whether AIG should be a SIFI or whether FSOC even had a choice but to designate AIG, but what should concern the insurance industry are the conclusions FSOC reached about the business of insurance and its apparent disregard for the state insurance regulatory system, writes Nelson Levine de Luca & Hamilton's Michael Nelson.One may debate whether AIG should be a SIFI or whether FSOC even had a choice but to designate AIG, but what should concern the insurance industry are the conclusions FSOC reached about the business of insurance and its apparent disregard for the state insurance regulatory system.
At best, FSOC’s written explanation of its decision shows a lack of understanding about insurance and demonstrates the bank-centric bias that many feared. At worst, it is a signal that almost any insurance group could be designated as a SIFI and brought under federal supervision.
