US blocking new list of global too-big-to-fail insurers

US wants designation suspended until new, activities-based approach is ready

Locked file
Locked: US regulators are blocking a G-Sii list update

US regulators are blocking efforts to update a global list of too-big-to-fail insurers, leaving the designated firms in regulatory limbo and raising questions about the current entity-based approach to managing systemic risk in the industry.

US representatives on the Financial Stability Board are refusing to endorse a 2017 revision of the list of global systemically important insurers, due for publication in November, according to two sources with knowledge of proceedings.

The impasse leaves it unclear whether the 2016 list will stay in effect, or whether the designation process will be effectively suspended – which would mean G-Siis would no longer be subject to additional regulatory and capital requirements that come with the designation.

The US is pressing the FSB to suspend G-Sii designations until after the International Association of Insurance Supervisors completes work on a new, activities-based approach to systemic risk, the sources say. The activities-based approach is not scheduled for adoption until 2019.

“The International Association of Insurance Supervisors and the FSB have realised designation is probably not the right way to go,” says a senior executive at a European firm in the sector. The FSB publishes annual updates of the G-Sii list in consultation with the IAIS and using an IAIS methodology last updated in 2016.

It’s hard to reconcile how a firm can be de-designated by its primary jurisdiction through a legally binding process, but remain systemic internationally through a largely behind-closed-doors process
Julie Mix McPeak, US National Association of Insurance Commissioners

Many in the industry have criticised the entity-based approach for penalising the largest firms simply because of their size. G-Siis are subject to enhanced group-wide supervision, including requirements for systemic risk management, liquidity management, and recovery and resolution plans. From 2022, firms designated in 2020 will also have to hold extra capital in the form of the higher loss absorbency measure; the IAIS has said this will represent, in aggregate, a 10% capital surcharge compared with international capital rules for non-G-Siis due to be adopted after 2019.

US roll-back

The domestic US equivalent of the G-Sii designation is also under siege. AIG’s status as a US systemically important financial institution (Sifi) was removed last month, while MetLife successfully appealed its designation in 2016.

Some see those decisions as a barrier to the reach of global insurance regulation in the US.

“The G-Sii process is non-binding,” says Julie Mix McPeak, Tennessee insurance commissioner and president-elect at the US National Association of Insurance Commissioners. “It’s hard to reconcile how a firm can be de-designated by its primary jurisdiction through a legally binding process, but remain systemic internationally through a largely behind-closed-doors process.”

Following an order by President Donald Trump, the Treasury is reviewing the US Sifi designation process by the Financial Stability Oversight Council, with a report on the findings due this month. Some in the industry believe the report will call for a shift away from the existing entity-based approach in the US.  

“An activities-based approach is the conclusion we’re expecting,” says a Washington lobbyist. “In some ways the FSOC review is jumping the gun on the global conversation.”

A spokesman for the FSB declined to comment, while the IAIS could not be reached for comment.  

Following an October 6 meeting of the FSB Plenary in Berlin, the body announced members had discussed the progress of annual reviews of G-Siis and systemically important banks but provided no further details.

The 2016 list of G-Siis comprises Aegon, Allianz, AIG, Aviva, Axa, MetLife, Ping An, Prudential Financial and Prudential plc.

Additional reporting by Callum Tanner

A follow-up feature will consider the international implications of AIG’s de-designation for the future of global insurance regulation.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact or view our subscription options here:

You are currently unable to copy this content. Please contact to find out more.

The future of life insurance

As the world constantly evolves and changes, so too does the life insurance industry, which is preparing for a multitude of challenges, particularly in three areas: interest rates, regulatory mandates and technology (software, underwriting tools and…

Most read articles loading...

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here