On April 3, 2012, the Financial Stability Oversight Council (FSOC) approved by unanimous vote a final rule for designating nonbank financial companies as systemically important financial institutions.1 An FSOC determination of systemic importance will subject a nonbank financial company to the prudential standards of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act or Act) and to the supervision of the Board of Governors of the Federal Reserve System (Board of Governors). The final rule follows a second notice of proposed rulemaking on October 11, 2011 (Second Notice) and a first notice of proposed rulemaking on January 26, 2011.2
Background
In issuing the final rule and related interpretive guidance, the FSOC noted that it received 41 comment letters to the Second Notice, including 12 comment letters from companies or trade associations in the insurance industry. The Second Notice followed the addition of the Director of the Federal Insurance Office (Michael McRaith) and the confirmation of the “Independent Insurance Expert” (Roy Woodall) to the FSOC after members of the insurance industry expressed concern at the absence of sufficient insurance industry input and representation among the FSOC members.3 In its introductory discussion of the comments received in response to the Second Notice, the FSOC cited comments from the insurance industry arguing “that the products and services of regulated, traditional insurance companies are highly substitutable and that these companies operate without significant leverage or reliance on short-term debt and are subject to high levels of existing regulatory scrutiny.” Responding to such comments, the FSOC noted that “[t]he [FSOC] does not intend to provide industry-based exemptions from potential determinations under section 113 of the Dodd-Frank Act, but the [FSOC] intends to give these comments due consideration in the Determination Process.”
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