In the wake of
MetLife’s victory in shedding its “too big to fail” designation, chief executives with other large insurance firms are feeling optimistic about their companies’ chances of doing the same.
Peter Hancock, CEO of American International Group, told
CNBC Thursday that the federal court decision for MetLife “certainly opens that opportunity” for
AIG. He added, however, that
AIG would “reserve judgment” and watch how financial regulators respond to the decision before acting.
Prudential Financial, which has also received the “systemically important financial institutions” or SIFI designation, told
USA Today that it “continuously review[s] developments that impact our company, and we are evaluating what is in the best interests of the company and our stakeholders.”
The designations, including the one given to MetLife that was defeated last week, were imposed by the Financial Stability Oversight Council, a 10-member regulatory board created under the Dodd-Frank Act. The council designates SIFIs in the hope of imposing stricter standards to safeguard the US economy and financial system following the 2008 financial crisis.
MetLife, AIG, Prudential and GE Capital are the only non-bank firms the council designated as SIFIs. Other SIFIs are major banks with $50 billion in assets or more – hence the “too big to fail” designation.
If the remaining firms do not successfully challenge their labels, they may be subject to stricter regulatory oversight as well as requirements to hold high capital reserves against losses.
The insurance industry has argued against the use of banking standards in the evaluation of large insurers since the inception of Dodd-Frank.
MetLife actively fought the label, and last week’s ruling came after a 2015 federal court challenge by the insurer. District of Columbia Judge Rosemary Collyer Wednesday ordered the council’s designation “rescinded,” though her full opinion was sealed.
An April 6 hearing will determine whether any portions of the opinion should remain secret, after which AIG and Prudential may find basis for similar appeals.
AIG, at least, has faced pressure from investors to fight the label by breaking into three separate entities. Hancock has called the SIFI issue a “red herring.”
