The US House of Representatives passed a bill yesterday allowing the Federal Reserve Board greater flexibility in determining how to apply capital standards to prominent insurance carriers.
The Insurance Capital Standards Clarification Act of 2014, which was strongly supported by the industry, was earlier passed in the Senate and awaits approval from the White House. It will amend the Dodd-Frank Act to free the Federal Reserve from using accounting principles for banking to measures insurers’ capital adequacy.
Members of the industry said under the current Dodd-Frank provisions, insurance companies would be subject to the same ill-fitting requirements as banks and have been lobbying Congress to make amends.
Life insurance giant
MetLife praised the decision as it battles a designation of “too big to fail.”
“Congress deserves tremendous credit for passing legislation with broad bipartisan support that will give the Federal Reserve the flexibility to tailor bank-centric capital rules for the life insurance business,” sai president and CEO Steven Kandarian. “The Fed now has the opportunity to write rules that will preserve competition and ensure affordable access to financial security.”
Trade groups also praised the decision.
“The legislation recognizes that there are fundamental differences between the insurance business model and the banking business model,” said Leigh Ann Pusey, president and CEO of the American Insurance Association. “The bipartisan legislation clarifies the Federal Reserve Board’s ability to tailor insurance-based capital standards for those insurers subject to Federal Reserve supervisions.”
The Property Casualty Insurers Association of America also welcomed the House action, saying it has “long been advocating domestically and internationally against imposition of inappropriate bank-centric capital requirements on insurers.”
