The Financial Stability Oversight Council (FSOC) has changed its mind. AIG is no longer considered too-big-to-fail and is now out from under the financial restrictions and regulations of the designation. Treasury Secretary Steven Mnuchin — who chairs the FSOC — explained why AIG isn’t considered a systemically important financial institution (SIFI).
“This action demonstrates our commitment to act decisively to remove any designation if a company does not pose a threat to financial stability,” he said.
The committee vote to remove AIG from the designation went 6 to 3 and Federal Reserve Chair Janet Yellen voted yes. So did the other new regulators recently appointed to the committee by President Trump.
AIG CEO Brian Duperreault is thrilled with the decision. “The council’s decision reflects the substantial and successful de-risking that AIG’s employees have achieved since 2008. The company is committed to continued vigilant risk management and to working closely with our numerous regulators to enable a strong AIG to continue to serve our clients,” he said.
AIG joins General Electric and MetLife as the third firm to lose the designation. MetLife won a court case and GE and AIG shed themselves of units and assets that caused the designation in the first place.
Prudential — the other insurer given the SIFI designation — is still on the SIFI list but is now working toward its own escape.
AIG will now be regulated by the New York Department of Financial Services. Its superintendent is Maria Vullo. Not exactly sounding positive, Vullo said her department will “continue to conduct in-depth and rigorous supervision of AIG's insurance companies to ensure their financial soundness and compliance with law. This state-based regulation will continue to keep our financial markets strong and robust while protecting consumers.”
Bartlet Naylor of Public Citizen — a financial policy advocate — is very unhappy with the decision. “Letting AIG escape oversight as a systemically important financial institution insults Americans who financed what was the biggest bailout of the 2008 Wall Street crash,” he said.
The Federal Reserve’s Yellen disagrees. “AIG has largely sold off or wound down its capital markets businesses, and has become a smaller firm that poses less of a threat. The possibility of de-designation provides an incentive for designated firms to significantly reduce their systemic footprint,” she said.
Just before the SIFI announcement, Duperreault said the company is doing a major reorganization. AIG will no longer have commercial and consumer segments. They are being sent to General Insurance and Life & Retirement. Each will have distinct business units.
• General Insurance will have commercial, personal insurance and U.S. and international field operations
• Life & Retirement is going to contain group retirement, individual retirement, life and institutional markets
“These changes are designed to best position AIG for the future, as a growing, profitable leader in the insurance industry that is famous for its underwriting excellence. We believe this structure will maximize our global platform by empowering our local geographies, and provide our businesses with the greatest competitive advantage and ability to serve our clients,” Duperreault said.
Source links: Insurance Business America — link 1, link 2, Fox Business, Insurance Journal, PropertyCasualty360.com