WASHINGTON BUREAU — The Senate has agreed to ask members of the H.R. 4173 conference committee to adjust a proprietary trading provision in the bill.

The Senate passed H.R. 4173, the Wall Street Reform and Consumer Protection Act Thursday.

Originally, some had speculated that the House and Senate might take an informal approach to reconciling their versions of the bill, but congressional leaders are setting up a formal conference committee.

The Senate has appointed 7 Democrats and 5 Republicans to represent it in conference proceedings.

Members of the Senate have voted 87-4 to ask the conferencees to ask for an exemption from “Volcker rule” restrictions on proprietary trading for insurers that happen to own banks or thrifts.

The senate has told the conferees to try “to ensure that the Volcker Rule’s proprietary trading restrictions do not extend to the normal operations of insurance affiliates of insured depository institutions.”

The proposal was made by Sens. Kay Bailey Hutchinson, R-Texas, and Kay Hagan, D-N.C.

The narrow exemption appears to be enough for property-casualty insurers, which provide only limited investment services for their customers through insured financial institutions.

USAA, San Antonio, Texas, for example, enlisted its employees and members in a lobbying campaign seeking changes in the H.R. 4173 proprietary trading provision.

Large life insurers that operate limited trust banks and engage in asset management activities, private equity activities or mutual fund activities are seeking a broader exemption.

Action on the Senate bill was delayed until life insurers won support from Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, for efforts to put a broader exemption for large life insurers in a final bill.

Frank sent two letters to Senate leaders indicating that he supports the request for a broader exemption.

Sen. Scott Brown, R-Mass., apparently agreed to vote for cloture, or a limit on H.R. 4173 debate, Thursday only after Frank wrote the letters supporting a broader propripetary trading exemption for insurers that own banks.

The Senate bill passed several hours later.

The Volcker rule, named after its chief proponent, Paul Volcker, an advisor to President Obama and former chairman of the Federal Reserve Board, would limit financial services firms’ bank and thrift affiliates to trading only in low-risk government securities.

The Senate has included the Volcker rule in its version of H.R. 4173; the House did not include the rule in its version.

Frank Keating, president of the American Council of Life Insurers, Washington, sent a letter to members of the Senate Monday uring them to support the Hutchison-Hagan proposal.

The House is not expected to appoint conferees until June 8, when it returns from its Memorial Day recess, insurance industry lobbyists say.

The lobbyists don’t expect the conference committee to get to work until the second week in June.

The Obama administration hopes Congress will complete work on the bill before Congress it for the Fourth of July recess.