ACLI Chief: Regulators Should Keep Consumers in Mind When Setting New Rules
October 23, 2014 by Jeff Jeffrey
As the federal government and international regulators move forward with efforts to enact new rules for the insurance industry, they should not “lose sight of” the reason rules are implemented in the first place — to help the consumer, said American Council of Life Insurers President and Chief Executive Officer Dirk Kempthorne.
During ACLI’s annual conference in Washington, D.C., Kempthorne talked to Best’s News Service about the Federal Reserve’s new role as an insurance regulator, the prospect of new capital standards being implemented and what the November election might mean for the industry.Q: What are you hearing from your members here at ACLI’s annual conference?
A: When you consider the American Council of Life Insurers, this state-based industry, when you take those member companies that are designated as [systemically important financial institutions], those that are deemed to be internationally active insurance groups, those that may have a thrift — we’re at about 60% of our premium volume that is now regulated beyond state regulation. And so, what are the ramifications of that, what are the implications of that?
One of the things we stress in all of these meetings is let’s please not lose sight of why all of this takes place. It’s to help people, the consumer. I have appreciated hearing from CEOs over the last two days, saying, “We need to find ways to simplify this.”
We really do need to find that, and how do you couple technology with that as well?
Q: You mentioned talking to CEOs. There was a panel this morning where regulation was a big topic. What jumped out at you from that panel?
A:You heard from them, one being a reinsurer, one being a SIFI, one being one of the major providers of long-term care, so you see the mix that is here, and yet you see the common themes of, with regards to capital standards, let’s get them right. With regards to regulation, let’s not forget why we’re doing this, for the people.
Q: The ACLI conference is happening at the same time as the conference being held by the International Association of Insurance Supervisors in Amsterdam. What do you think about the regulatory developments on the international stage in combination with new federal regulations?
A: It’s interesting. [The IAIS] is now removing what was called “observer status.” So in a world of transparency, they now want to have not as many people in the rooms. So we need to determine what is the best means by which we can continue to communicate, educate, collaborate with these regulators, so that we do not get unintended consequences…We ought to get this right. There are so many steps necessary to get there.
Also throw into this mix that you have the G-20 that created the Financial Stability Board, which now is saying to the IAIS, “We want you to come up with a variety of things, whether it’s capital standards, group supervision, whatever the case may be.” I think sometimes the IAIS is now borrowing that name of FSB and saying, “In the name of FSB, we must do this.”
Q: You talked about the level of transparency at the IAIS. But transparency has also been an issue at the Financial Stability Oversight Council. What do you think about all the conversations that are so important to the industry and to the consumers that are taking place in what the industry has said is a closed-door fashion?
A: Let’s take a look at some of the entities that are involved, such as the Fed. The Fed, which now has this new responsibility to regulate those systemically important financial institutions, the SIFIs. We recently met with Fed Governor [Daniel] Tarullo. I had met with him prior to that. But in the second meeting, we included six of our CEO member companies. The Fed, to their credit, said, “We regulate banks. This idea of regulating insurance institutions is new.” And so from that meeting, we now have established work sessions.
Along with that, we need to get a correction to what has been called the Collins Amendment, which again has unintended consequences. But the Fed attorneys determined that the language that Sen. [Susan] Collins put in now requires the Fed to have the same bank standards on life insurance. It doesn’t work. The Fed has said so. Treasury has said so. We finally got it out of the Senate, in a very partisan atmosphere on Capitol Hill, we got it out of the Senate 100 to 0 on a unanimous consent request. We have 219 co-sponsors in the House. I think we’ll get the solution, ultimately. But the Fed has said, “We need that so we can demonstrate that there is absolutely a difference between a bank and a life insurance company.” That will help them in that FSOC role.
While we may not be able to be in on all of the FSOC meetings, those members we can have discussions, work sessions.
Q: Finally, we have an election coming up. There is the possibility of flipping the Senate. Some have said that if the Senate flips, it could change the calculus for a lot of the industry’s priorities. What are your thoughts?
A: Retirement security, financial well-being of citizens, really is not a partisan issue. You look back at Sen. Rob Portman, [Ohio-Republican] what he’s done. And you look at a variety of things that have been bipartisan in their nature, we think that we can find bipartisanship. We meet with both sides.
And who knows what will happen, whether the Republicans will take the Senate? If they do, again we’re going to be there. We’re going to be talking with them about solutions for the future. But, Jeff, as you know, the next thing they’ll say is, “The election is over. But the presidential race is now starting.” So is that another two years that we write off as gridlock? In the meantime, people are continuing to age. They still have their needs. So you need to have a vibrant, robust industry. That’s what we’re about.
