AIG 2012 Annual Report Download - page 44

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• The Council may recommend that state insurance regulators or other regulators apply new or heightened
standards and safeguards for activities or practices that we and other insurers or other financial services
companies engage in.
• Title II of Dodd-Frank provides that a financial company whose largest United States subsidiary is an insurer (such
as us) may be subject to a special liquidation process outside the federal bankruptcy code. That process is to be
administered by the FDIC upon a coordinated determination by the Secretary of the Treasury, the director of the
Federal Insurance Office and the FRB, in consultation with the FDIC, that such a financial company is in default or
in danger of default and presents a systemic risk to U.S. financial stability.
• Dodd-Frank establishes a new framework for regulation of the over-the-counter (OTC) derivatives markets –
including the imposition of margin and collateral requirements, centralized clearing and reporting/record keeping
requirements – that could affect various activities of AIG and its insurance subsidiaries.
• Dodd-Frank mandated a study to determine whether stable value contracts should be included in the definition of
‘‘swap.’’ If that study concludes that stable value contracts are swaps, Dodd-Frank authorizes certain federal
regulators to determine whether an exemption from the definition of a swap is appropriate and in the public
interest. Certain of our affiliates are in or may participate in the stable value contract business. We cannot predict
what regulations might emanate from the aforementioned study or be promulgated applicable to this business in
the future.
• Dodd-Frank established a Federal Insurance Office (FIO) within the Department of the Treasury headed by a
director appointed by the Secretary of the Treasury. While not having a general supervisory or regulatory 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 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, although 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 imposes various assessments on financial companies, including, as applicable to us, 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 us into state guaranty funds).
We cannot predict whether these actions will become effective or the effect they may have on the financial markets
or on our business, results of operations, cash flows, financial condition and credit ratings. However, it is possible
that such effect could be materially adverse. See Item 1A. Risk Factors – Regulation for additional information.
Other Regulatory Developments
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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 SIFIs, 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 IAIS, headquartered in Basel, Switzerland) to create
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AIG 2012 Form 10-K 27
ITEM 1 / BUSINESS