AIG 2014 Annual Report Download - page 43

ITEM 1 / BUSINESS
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• As a nonbank SIFI, we are currently required to provide on an annual basis (or more frequently, if required) to the FRB and
FDIC a plan for our rapid and orderly resolution in the event of material financial distress or failure, which must, among
other things, provide a detailed resolution strategy and analyses of our material entities, organizational structure,
interconnections and interdependencies, and management information systems. We continue to update and refine our
resolution plan, which was originally submitted to regulators on July 1, 2014. Our next resolution plan is required to be
submitted to the FRB and FDIC on July 1, 2015. If the FRB and FDIC jointly determine, based on their review of the plan,
that it is not credible or would not facilitate our orderly resolution under the bankruptcy code, they may require us to re-
submit an amended plan. If the re-submitted plan also fails to meet regulatory expectations, the FRB and FDIC may
exercise their authority under Dodd-Frank to impose more stringent capital, leverage, or liquidity requirements, restrict our
growth, activities, or operations, require us to divest assets and operations, or otherwise increase their level of supervision
of us.
• 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 resolution process outside the federal bankruptcy code. That process is to be administered by
the FDIC upon a coordinated determination by the director of the Federal Insurance Office and the FRB, either at the
request of the Secretary of the Treasury or on their own initiative, and 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 provides for significantly increased regulation of and restrictions on derivatives markets and transactions that
could affect various activities of AIG and its insurance and financial services subsidiaries, including (i) regulatory reporting
for swaps (which are regulated by the CFTC) and security-based swaps (which are regulated by the SEC), (ii) mandated
clearing through central counterparties and execution through regulated exchanges or electronic facilities for certain swaps
and security-based swaps and (iii) margin and collateral requirements. Although the CFTC has not yet finalized certain
requirements, many other requirements have taken effect, such as swap reporting, the mandatory clearing of certain
interest rate swaps and credit default swaps, and the mandatory trading of certain swaps on swap execution facilities or
exchanges. The SEC has proposed, but not yet finalized, rules with respect to certain of the regulations and restrictions
noted above governing security-based swaps. These regulations have affected and may further affect various activities of
AIG and its insurance and financial services subsidiaries as rules are finalized to implement additional elements of the
regulatory regime.
Similar regulations have been proposed or adopted outside the United States. For instance, the EU has also established a
set of new regulatory requirements for EU derivatives activities under EMIR. These requirements include, among other
things, various risk mitigation, risk management and regulatory reporting requirements that have already become effective
and clearing requirements that are expected to become effective in 2015. These requirements could result in increased
administrative costs with respect to our EU derivatives activities and overlapping or inconsistent regulation depending on
the ultimate application of cross-border regulatory requirements between and among U.S. and non-U.S. jurisdictions.
• 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 for stable value contracts is appropriate and in the public interest.
Certain of our affiliates 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 United States Department of the Treasury (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. On December 12, 2013,
the FIO released a Dodd-Frank mandated study on how to modernize and improve the system of insurance regulation in the
United States. The report concluded that the uniformity and efficiency of the current state based regulatory system could be
improved and highlighted areas in which Federal involvement is recommended. In the near-term, the FIO recommended
that the states undertake reforms regarding capital adequacy, reform of insurer resolution practices, and marketplace
regulation.
• Dodd-Frank established the Consumer Financial Protection Bureau (CFPB) as an independent bureau 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