The methods FSOC uses to choose SIFIs is unfair, and the council has failed to acknowledge that state insurance regulators already have a long and successful track record of protecting life insurer solvency, the ACLI said in the statement.

The ACLI added that FSOC lacks adequate state insurance regulator representation and fails to understand how the structure of life insurance products limits the possibility of the kind of “run on the bank” that might affect depository institutions.

Insurers argue that, although an annuity or life policy might have a cash value, contract provisions such as surrender charges sharply limit large number of holders’ ability to make quick withdrawals.

David Zaring, a Wharton business ethics professor, testified that FSOC needs flexibility to do its job. Putting FSOC in a straitjacket “would make evasion easy, and thereby encourage, rather than discourage, risk-taking,” Zaring said.

Rep. Dennis Ross, R-Fla., one subcommittee member, said FSOC has to do a better job of making the selection process more open, and give companies better ways to escape from SIFI oversight.

Paul Kupiec, a witness from the conservative American Enterprise Institute, said the current system can lead to onerous investigations that hit growing, useful companies out of the blue.

“This becomes a penalty for a well-run, growing company,” Kupiec said.

The committee posted a video recording of the hearing and written versions of the testimony here.