The U.S. lawmaker who wrote a Dodd-Frank Act provision that imposes bank-like capital standards on the insurance industry introduced legislation to ease the requirements.
Senator Susan Collins, a Maine Republican, said at a Senate Banking subcommittee hearing today that her 2010 provision was not intended to subject insurance companies to the same capital and liquidity standards as banks.
“While it is essential that insurers subject to Federal Reserve Board oversight be adequately capitalized,” Collins said at the hearing, “it would be improper, and not in keeping with Congress’ intent, for federal regulators to supplant state- based insurance regulation with a bank-centric capital regime for insurance activities.”
The provision of the Dodd-Frank overhaul of U.S. financial regulation requires the Fed to set minimum capital and leverage standards on non-bank firms, including insurance companies like Prudential Financial Inc.
Collins said insurers engaged in activities regulated as insurance at the state level would be exempted from the Dodd- Frank capital requirements under her bill.
Insurance companies say bank capital standards don’t fit their business and submitted testimony to the subcommittee to press their case for an amendment.
“It’s a difference in the fundamental business model,” Julie Spiezio, senior vice president of insurance regulation and deputy general counsel for the American Council of Life Insurers, said. “It’s like trying to put the safety standards of airplanes on cars.”
Fed Agreement
Federal Reserve Chair Janet Yellen and her predecessor, Ben S. Bernanke, have said they agree that insurance companies should meet different capital standards than banks.
“We recognize that there are very significant differences between the business models of insurance companies and the banks that we supervise, and we are taking the time that’s necessary to understand those differences and to attempt to craft a set of capital and liquidity requirements that will be appropriate to the business model of insurance companies,” Yellen said at a Feb. 27 hearing.