N.J. regulator takes broad look at Prudential in expanded role

By Suzanne Barlyn

(Reuters) - New Jersey's insurance regulator is conducting a comprehensive exam of Prudential Financial Inc (NYSE: PRU) as part of a recently expanded supervisory role, a company executive said on Tuesday.

State examiners are now conducting the exam, which pertains to New Jersey becoming Prudential's "group supervisor" under a 2014 law, Vice Chairman Mark Grier said during a presentation. The role confers broad authority, and allows the state to review all of Prudential's operations, including those that do not pertain to insurance.

Prudential, headquartered in Newark, New Jersey, sells individual and group insurance products in the U.S. and abroad. Its investment arm, PGIM, manages over $1 trillion in assets, including for outside investors – a business state insurance regulators have not traditionally overseen.

U.S. insurers have long been ruled by a patchwork of state regulators, but federal regulators have taken on a bigger role since the 2008 financial crisis. Prudential is one of two U.S. insurers designated as a "systematically important financial institution," or SIFI, by federal regulators, subjecting it to higher capital requirements and tougher oversight than smaller peers.

New Jersey also works in tandem with the Federal Reserve, Prudential's other group supervisor. The New Jersey examination "covers all material entities in the group regardless of location or type of business, including whether the business is insurance or non-insurance," Marshall McKnight, a spokesman for the state’s Department of Banking and Insurance said.

As New Jersey's role has expanded, Prudential is hoping oversight from Washington will ease.

The Trump administration and Republican lawmakers are re-examining the SIFI designation process as part of a broader effort to reduce regulatory burdens on U.S. business.

Prudential is also keeping a close eye on a lawsuit involving MetLife Inc (NYSE: MET), which has so far successfully fought its SIFI designation in court, but is facing an appeal from the federal government.

The outcome could set a precedent for the future of Prudential's own designation and "may allow us to do something in the legal arena," Grier said.

(Reporting by Suzanne Barlyn; Editing by Chizu Nomiyama, Bernard Orr, Lauren LaCapra)

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