Nelson outlines concerns with FIO

He also says he is concerned about insurers being designated domestic systemically important financial institutions (SIFIs) or global systemically important insurers (G-SIIs), as he worries insurers large enough to become SIFI or G-SII could create a two-tier system, and also lead to over-concentration in the insurance sector — that a perception of some companies being safer than others could “reduce market discipline, create competitive distortions and encourage undesirable consolidation and concentration in the insurance sector.”

Regulators in the U.S. and internationally should work to address the sources of systemic risk to reduce the potential an insurer could be considered risky in this manner, since it is not good for policyholders, he says.

“With that in mind, we continue to examine the scope of our authorities and resources to ensure that systemic risk does not emanate from activities within our purview,” Nelson adds.

Meanwhile, S. Roy Woodall Jr., the independent member of the Financial Stability Oversight Council (FSOC) with insurance expertise, says the IAIS is hoping to change its bylaws to allow him to better serve his legal role.

Woodall disclosed concerns in testimony during the hearing, “The Impact of International Regulatory Standards on the Competitiveness of the U.S. Insurers.”

“I am often told that some IAIS matters are confidential and cannot be shared with me,” he says. “I believe that attendance at IAIS systemic risk meetings is critical to fulfilling my responsibilities as a voting member of the FSOC, given the centrality of systemic risk to FSOC responsibilities.”