Fitch: Non-Bank SIFI Status Neutral to Insurance Ratings
CHICAGO & NEW YORK -- June 4, 2013
American International Group, Inc. (AIG) and Prudential Financial, Inc. (PFI)
can expect higher capital standards upon their designation as systemically
important financial institution (SIFI), according to Fitch Ratings. The
positive credit aspects of higher capital requirements are expected to be
offset by competitive pressures from non-SIFI insurers. Therefore, we note the
designations are largely credit neutral for both AIG and PFI.
While we expect that SIFI-designated U.S. life insurers will be subject to
increased capital requirements and higher costs associated with tougher
regulatory compliance required, the exact nature of the risk/capital regime
remains highly uncertain, and specifics surrounding implementation remain
AIG and PFI Monday both said they had been notified by the U.S. Financial
Stability Oversight Council (FSOC) of their systemically important
designation. GE Capital was also notified. The FSOC has not released its list
of non-bank designated SIFIs, so others could be subject. The companies have
30 days to appeal the FSOC ruling.
Non-bank SIFIs will likely include a diverse set of business models with
different risk drivers. Fitting those business models into a uniform reporting
framework is likely to prove problematic and/or expensive. One potential
offset of designation is the creation of a barrier to entry or prevention of
sizable competitors emerging.
SIFI status revelation for those companies in our rated universe comes as no
surprise, as both AIG and PFI are among the largest life insurers in the U.S.
based on total admitted assets. As such, we believe both companies are already
well into the process of repositioning their business activities and risk
management/reporting systems in anticipation of SIFI designation.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit
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companies and current ratings, can be accessed at www.fitchratings.com. All
opinions expressed are those of Fitch Ratings.
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Julie A. Burke, CPA, CFA, +1 312-368-3158
Corporate Finance, Insurance
70 West Madison Street
Kellie Geressy-Nilsen, +1 212-908-9123
One State Street Plaza
New York, NY
Brian Bertsch, +1 212-908-0549
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