Updated June 2, 2014 4:34 p.m. ET
WASHINGTON—The Federal Reserve is hiring a former state supervisor and insurance company executive to lead its oversight of big insurance firms, adding an experienced hand to counter criticism the central bank lacks knowledge of the business.
The Fed named Thomas Sullivan, who served as Connecticut Insurance Commissioner during the financial crisis, to a new senior adviser position, a Fed spokeswoman said. Mr. Sullivan will lead oversight of some of the nation's largest insurers and represent the Fed in global discussions about rules for the industry.
Mr. Sullivan will become a rarity at the Fed: a senior official with lengthy experience in an area where critics have accused it of being a novice and taking a bank-centric view. The 2010 Dodd-Frank law gave the Fed new authority to regulate insurers and other large, nonbank financial firms that were deemed by regulators to be "systemically important," including dictating capital requirements for those firms.
Large insurers like Prudential Financial Inc. PRU +2.39% Prudential Financial Inc. U.S.: NYSE $86.03 +2.01 +2.39% June 3, 2014 4:02 pm Volume (Delayed 15m) : 4.21M AFTER HOURS $86.03 0.00 0.00% June 3, 2014 7:05 pm Volume (Delayed 15m): 388,600 P/E Ratio 31.18 Market Cap $38.82 Billion Dividend Yield 2.46% Rev. per Employee $1,068,990 06/03/14 Senate Passes Insurance Capita... 06/03/14 Fed's Insurance Hire Defended ... 06/02/14 Stocks End Up Despite Jolt Fro... More quote details and news » and MetLife, MET +2.74% MetLife Inc. U.S.: NYSE $53.21 +1.42 +2.74% June 3, 2014 4:01 pm Volume (Delayed 15m) : 9.24M AFTER HOURS $53.21 0.00 0.00% June 3, 2014 5:56 pm Volume (Delayed 15m): 86,619 P/E Ratio 16.58 Market Cap $58.29 Billion Dividend Yield 2.63% Rev. per Employee $1,065,030 06/03/14 Senate Passes Insurance Capita... 06/03/14 Fed's Insurance Hire Defended ... 06/02/14 Fed Names New Head of Insuranc... More quote details and news » Inc. have said banklike capital rules could have negative consequences for their business. So far, the Fed has given few details about how it will fashion the insurance capital rules, but Mr. Sullivan's appointment is a signal that the Fed wants to change that by moving forward with publishing them.
In an interview, Mr. Sullivan declined to comment on the key policy question facing the Fed: Whether the Dodd-Frank law gives the agency enough flexibility to design capital rules in a way that differentiates insurers from banks. "I am not a policy maker," he said, adding "If someone asks me my opinion I'm going to give it to them."
As a state official in 2009, Mr. Sullivan testified before a House committee drafting the Dodd-Frank law. He urged the lawmakers not to undermine state-based insurance regulation. "The insurance sector is critically important, but the business of insurance hasn't created the kinds of unrestrained and unregulated systemic risks that reform efforts seek to manage or prevent," Mr. Sullivan said in the testimony.
On Monday, Mr. Sullivan said he enters his new job with the view that "no regulatory regime is perfect." The key test for any capital rule, he said, is whether they can prevent problematic failures of insurance firms. "There's no better benchmark than that."
Mr. Sullivan, 52, held the Connecticut post from 2007 to 2010 and until May was working as a partner at PricewaterhouseCoopers. He is a former executive at The Hartford Financial Services Group Inc., where he worked for more than 20 years.
Mr. Sullivan's first day at the Fed will be Monday, June 9. He will report to Arthur Lindo, who heads the policy group in the Fed's Division of Banking Supervision and Regulation.
The Fed oversees Prudential and American International Group Inc., the two insurers that U.S. regulators have deemed "systemically important" financial firms. MetLife is expected to receive the same label later this ye ar. The Fed also regulates other large insurance firms that own banks, including Nationwide Mutual Insurance Co., and TIAA-CREF.
Write to Ryan Tracy at ryan.tracy@wsj.com
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