(Adds comment from Ann Kappler, Prudential's deputy general
counsel and head of external affairs)
By Sarah N. Lynch and Suzanne Barlyn
April 19 With no sign of a replacement in the
works, the U.S. insurance industry is pushing to prevent the
departure of a key figure on the federal body that determines
how large insurance companies are regulated.
Roy Woodall, the sole independent voting member of the
Financial Stability Oversight Council (FSOC) with insurance
expertise, will lose his seat in late September, as his six-year
term set out under the Dodd-Frank financial regulation reform
His presence on the council is important to the insurance
industry, because FSOC has the power to decide whether large
financial companies are "systemically important financial
institutions," or SIFIs, a tag that carries higher capital
requirements and Federal Reserve oversight.
As there is no federal insurance regulator, Woodall is
effectively the most important figure in U.S. regulation of
He will be forced to step down in five months, leaving a
critical vacancy on the FSOC, which is based out of the U.S.
Treasury Department, unless Congress changes the Dodd-Frank law
and permits him to be held over temporarily, or U.S. President
Donald Trump acts swiftly to nominate a replacement.
"Treasury doesn’t have that much experience in insurance, so
it makes the insurance expert particularly important," said Dave
Snyder, vice president of international policy and policy
development for the Property Casualty Insurers Association of
A U.S. Treasury spokesperson declined comment.
Woodall, 80, told Reuters that he would not want to serve
another full six-year term but would be willing to stay on until
a replacement can be confirmed.
Several large insurers fought their SIFI designations,
arguing that they do not pose the same kind of risks as big
Prudential Financial Inc and American International
Group Inc still carry the designation, but Prudential is
widely expected to seek to have it rescinded.
Industry executives say that if Woodall leaves without a
replacement lined up, it could hurt their chances of success.
FSOC's process to determine whether to apply the designation
is "imprecise," said Ann Kappler, Prudential's deputy general
counsel and head of external affairs, on Wednesday during an
event about insurance regulation organized by the Bipartisan
Policy Center, a think tank.
Many FSOC staffers responsible for decisions did not fully
understand how the company operates, Kappler said. "Despite the
amount of work done by FSOC staff, it was rife with problems,"
Two-thirds of FSOC's sitting members must support rescinding
a designation for it to happen, and regulatory matters affecting
insurance companies are likely to come up during FSOC meetings.
A former insurance commissioner of Kentucky, Woodall has
more than 50 years of experience in insurance regulation, law
and policymaking. Former President Barack Obama appointed him to
the FSOC in 2011.
He voted against designating Prudential and MetLife Inc
as SIFIs but was outnumbered by his other FSOC
He favored designating AIG, whose near-failure during the
2008 crisis was a major threat to the financial system, as well
as GE Capital, which has since shrunk and simplified.
"Roy Woodall is nobody's puppet," said Bridget Hagan, a
partner at the lobbying and consulting firm Cypress Group, who
also leads a coalition of insurers that are subject to Federal
Reserve supervision. "But he has deep experience ... It's
important that he stay in his role until a new official is
GE Capital shed its designation after breaking itself up,
and MetLife successfully sued the government to shake its
designation. An appeal is working its way through the courts.
Although Woodall’s departure is five months away, insurers
are worried that the White House will not nominate a replacement
in time, or that Congress will not change the law to permit
Woodall to be held over on a temporary basis.
Trump has been slow to appoint financial regulators,
including those that wield more power, such as the Federal
Reserve's vice chair of supervision.
A White House spokeswoman said the president is aware of the
deadline and that it will be addressed in due time.
Woodall's situation is unique on the council, whose other
members are allowed to continue serving in their roles on
expired terms, or be temporarily replaced with an acting member
if there is a vacancy. The FSOC is composed of heads of federal
financial regulators and led by U.S. Treasury Secretary Steven
Industry lobbyists are starting to approach lawmakers to
find out whether they might be willing to tuck language into
unrelated legislation, such as a spending bill, that would allow
Woodall to stay in place, a person familiar with the matter
A financial regulatory proposal by House Financial Services
Chairman Jeb Hensarling would merge Woodall’s role with a
separate job inside the U.S. Treasury's Federal Insurance Office
and allow for the sitting expert to be held over after a term
expires. But the bill is not expected to go far because Senate
Democrats oppose it.
(Reporting by Sarah N. Lynch in Washington and Suzanne Barlyn
in New York; Editing by Lauren Tara LaCapra and Bill Rigby)