In October of last year, insurance giant, MetLife, announced plans to bring a lawsuit against the Financial Stability Oversight Council (FSOC) over the company’s designation as a “systemically important financial institution.”  Last week, MetLife formalized its charges.  The lawsuit is not only one of the largest challenges to the post crisis financial reform legislation, but also takes aim at one of the most popular provisions of the law.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the FSOC, led by the United States (US) Treasury Department, is tasked with identifying “systemically important financial institutions,” or so called “too big to fail” institutions.  Big banks and insurers are among these institutions, so as to prevent the taxpayer funded bailouts seen in 2008, including AIG, Bank of America, Citigroup and the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac.  Institutions identified by the FSOC as falling within this definition will be subject to heightened regulations and supervision.

MetLife’s suit claims that its designation is premature, given that many of the rules governing insurers under the Dodd-Frank Act have yet to be finalized.  MetLife also claims that it does not pose as great a risk as big banks to the financial system and has expressed concern for the impact of the designation on policyholders.  The course and outcome of the lawsuit will undoubtedly receive considerable attention as it will test the durability of the Dodd-Frank Act and define future challenges to the legislation.

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