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AIG, Prudential Get Short Too-Big-to-Fail Reprieve

Posted By Administration, Tuesday, July 11, 2017

The Federal Reserve and the Federal Deposition Insurance Corporation (FDIC) are charged with making sure banks and the insurance companies designated as significantly important financial institutions (SIFI) put together a plan to unwind safely if they get into deep financial waters.

Eight of the nation’s largest banks submitted what the Fed and the FDIC are calling living wills. Now regulators from both will look at those documents to make sure the plans will really work. That’s not a given. Since the implementation of the Dodd-Frank Act, several banks have had their plans returned as unworkable.

They were called “unrealistic” or “overly optimistic.”

At the same time that those plans were submitted, the Fed and the FDIC told AIG and Prudential — two of the three insurance firms locked into the too-big-to-fail system (as we will note later, MetLife is the other and it sued its way out) — were given an extension. Their deadline was the end of 2017 but they’ll be given an extra year to comply.

The president and his administration want to relax some of the too-big-to-fail regs and reduce the frequency in which these banks must submit plans from once a year to every other year.

MetLife is the only insurance company or bank to sue and get out of the SIFI designation. One of the ways MetLife is using to get out from under the Dodd-Frank Act’s too-big-to-fail and SIFI designation is to spin off its life insurance division.

The Delaware Insurance Department has approved the spinoff. That’s an important first step and it is notable that at least one state insurance department approves. But the real, final approval must come from the Securities and Exchange Commission (SEC).

Once it is approved — and no one doubts it will be — the new company will be called Brighthouse Financial and will have most of MetLife’s life insurance business. In fact, the spinoff will put MetLife — currently the nation’s largest life insurer — behind Prudential Financial in life insurance asset size.

Brighthouse Financial will begin its existence with $223 billion in assets and 1.3 million policyholders and 1.5 annuity owners. That’s about a quarter of MetLife’s assets.

Experts think approval will likely happen by the end of August or in early September.


Source links: Insurance Business America, Insurance Journal 

Tags:  AIG  Insurance Content  Insurance Industry  Insurance News  Prudential Get Short Too-Big-to-Fail Reprieve  Weekly Industry News 

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