MetLife to meet skeptical regulators in bid to escape rules 

MetLife, the largest U.S. insurer, will make a final plea on Monday to a group of U.S. regulators determined to subject it to tougher oversight as they probe which firms could pose a risk to the larger financial system.

Metlife, unlike counterparts AIG and Prudential which have already been deemed “systemic” by FSOC, has vigorously fought the tag.

After FSOC in September proposed to add MetLife to that group, the insurer’s chief executive Steven Kandarian hit back.

But observers say MetLife faces an uphill battle, especially after an international body of regulators had already deemed MetLife systemic on a global level in July 2013.

The 2010 Dodd-Frank Wall Street reform act automatically designated banks with more than $50 billion in assets as “systemically important financial institutions.”

In captive reinsurance, life insurance companies transfer risk to entities affiliated with their business in overseas jurisdictions or U.S. states with light-touch rules, which allows them to free up regulatory capital.

This is generally seen as a low-risk activity, but played a key role in the near-collapse of AIG, which was reinvesting much of its collateral in often complex and risky instruments that rapidly lost their value when the crisis hit.

Lastly, regulators are wary about a possible run on an insurer much in the same way as on a bank. The industry is fiercely contesting this perception, saying their business model is different, and funding more stable.

Source: Reuters-MetLife to meet skeptical regulators in bid to escape rules

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