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Member, Beacon International Group, Ltd.
WASHINGTON—Six insurance and financial services industry trade groups have sent a letter to the leaders of a U.S. Senate committee opposing creation of a prefunded systemic risk resolution fund in financial services regulatory reform legislation.
“A new prefunded systemic fund would threaten the economic recovery by diverting capital from job creation when previous efforts to augment capital are beginning to have an impact,” the groups, which include the Washington-based American Insurance Assn. and the Des Plaines, Ill.-based Property Casualty Insurers Assn. of America, wrote in the Monday letter to the Senate Banking, Housing and Urban Affairs Committee. “Further, there is no evidence that the existence of such a fund would deter the creation of new asset bubbles or other market distortions.”
The letter—sent to committee Chairman Chris Dodd, D-Conn.; Richard Shelby, R-Ala., the panel's ranking Republican member; and other committee members—noted that legislation approved by the House Financial Services Committee authorizes a fund of up to $150 billion. “It is not clear how these funds would be raised,” the insurance groups wrote. “For the financial services industry, which is already hampered by capital depletion and investor uncertainty, such a fund would only exacerbate these problems.”
The American Council of Life Insurers, the Financial Services Forum, the Financial Services Roundtable—all based in Washington—and the New York-based Securities Industry and Financial Markets Assn. also signed the letter.