AIG 2011 Annual Report Download - page 37

authority over the business of insurance, the director of this office performs various functions with respect to
insurance (other than health insurance), including serving as a non-voting member of the Council and
participating in the Council’s decisions regarding insurers, potentially including AIG, to be designated as a
SIFI. The director is also required to conduct a study on how to modernize and improve the system of
insurance regulation in the United States, including by increased national uniformity through either a federal
charter or effective action by the states. The FIO may also recommend enhanced regulations to state
insurance regulatory bodies.
• Dodd-Frank authorizes the FRB to require a savings and loan holding company or a SIFI to place its
financial activities in an intermediate holding company separate from non-financial activities (as defined for
purposes of the Bank Holding Company Act) and imposes restrictions on transactions between the two
businesses, which could be burdensome and costly to implement.
• Dodd-Frank established the Consumer Financial Protection Bureau (CFPB) as an independent agency within
the FRB to regulate consumer financial products and services offered primarily for personal, family or
household purposes. Insurance products and services are not within the CFPB’s general jurisdiction, though
the U.S. Department of Housing and Urban Development has since transferred authority to the CFPB to
investigate mortgage insurance practices. Broker-dealers and investment advisers are not subject to the
CFPB’s jurisdiction when acting in their registered capacity.
• Title XIV of Dodd-Frank also restricts certain terms for mortgage loans, such as loan fees, prepayment fees
and other charges, and imposes certain duties on a lender to ensure that a borrower can afford to repay the
loan.
• Dodd-Frank seeks to increase efficiency, reduce transaction costs and improve consumer access in the
nonadmitted property and casualty insurance market (excess and surplus lines). AIG expects that these
measures will make certain of Chartis’ operations within the U.S. more streamlined and efficient, although
they could lead to greater competition in these markets.
• Dodd-Frank includes various securities law reforms that may affect AIG’s business practices and the
liabilities and/or exposures associated therewith, including:
• The SEC completed a staff report on registered broker-dealers who provide personalized investment
advice to retail investors, such as certain of SunAmerica’s operations. The staff report recommended to
Congress a uniform fiduciary standard of conduct for broker-dealers and investment advisers. The SEC
may also require broker-dealers selling proprietary or a limited range of products to make certain
disclosures and obtain customer consents or acknowledgements.
• The SEC and other regulators proposed regulations requiring the originator of certain asset-backed
securities to retain at least five percent of the credit risk of securities sold, which, if adopted, may apply
to activities of subsidiaries of AIG as part of their funding activities in the future.
Dodd-Frank imposes various assessments on financial companies, including, as applicable to AIG, ex-post
assessments to provide funds necessary to repay any borrowing and to cover the costs of any special resolution of
a financial company conducted under Title II (although the regulatory authority would have to take account of the
amounts paid by AIG into state guaranty funds). AIG cannot predict the potential effects the new legislation will
have on its organizational structure, financial condition or results of operations. However, it is possible that such
effect could be materially adverse. See Item 1A. Risk Factors — Regulation for additional information.
In addition to the adoption of Dodd-Frank in the United States, regulators and lawmakers around the world are
actively reviewing the causes of the financial crisis and taking steps to avoid similar problems in the future. The
Financial Stability Board (FSB), consisting of representatives of national financial authorities of the G20 nations,
has issued a series of frameworks and recommendations intended to produce significant changes in how financial
companies, particularly systematically important financial institutions, should be regulated. These frameworks and
recommendations address such issues as financial group supervision, capital and solvency standards, systemic
economic risk, corporate governance including compensation, and a host of related issues associated with
responses to the financial crisis. The FSB has directed the International Association of Insurance Supervisors (the
AIG 2011 Form 10-K 23