Insurance companies no longer “too big to fail” if congressman will have his way

Congressman proposes new measure aimed at ‘systematically important’ insurers

Insurance companies no longer “too big to fail” if congressman will have his way

Insurance News

By Allie Sanchez

Rep. Jeb Hensarling wants insurers to lose the “too big to fail” tag as the economy stabilizes, through his proposed measure to “remove remaining nonbank SIFI (systemically important financial institution) references.”
The Financial Stability Oversight Council, a consortium of regulators, stamped AIG, Metlife and Prudential as “systemically important” to the economy in the years following the financial crisis. This meant that the financial failure of one of these companies would echo deep into the US economy.

According to media outlet CNBC, Hensarling proposes to remove non-banking institutions from the list. Banks will retain their “too big to fail” handle, which entails heavy regulatory costs, strict government oversight, and stringent capital rules to ensure they will not need bail out during a crisis.

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In the past, MetLife sued the government to have the title removed, while General Electric sold off its GE Capital affiliate to rid itself of the appellation.

The draft law proposed by Hensarling last year, called the “Financial Choice Act 1.0” also seeks to remove the FSOC’s jurisdiction over which firms are systemically important to the economy.


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