The American Council of Life Insurers (ACLI) is concerned about the Federal Reserve Board’s approach to stress testing as applied to life insurance companies, arguing that a bank model is too overbearing for an insurer, and also suggesting that there be little to no public disclosure of stress test results of any insurer, only banks.
The ACLI wrote of its concerns on the board's policy statement on the scenario design framework for stress testing in a letter to the Fed mid-month January. The national trade association has more than 300 member companies representing more than 90 percent of the assets and premiums of the life insurance and annuity industry in the U.S.
Failing a stress test has serious consequences. In MetLife’s first reaction to the Fed decision last March, Steven Kandarian, chairman, CEO and president, said that amongst the things MetLife was penalized for was the holding of funds of variable annuity customers in separate accounts. Kandarian also said that the Fed’s methodology unfairly resulted in “harsh treatment” for MetLife’s corporate bond portfolio. MetLife was also not permitted by the Fed to help its books by buying back shares of its own stock.
Companies with between $10 billion and $50 billion in total assets that begin conducting their first company-run stress test in in the fall of 2013 will not have to publicly disclose the results of that first stress test.