AALU Seeks FSOC Exemptions from Volcker Rule

The Association for Advanced Life Underwriting is seeking exemptions from the Volcker Rule for two common life insurance arrangements.

In a comment letter addressed to the U.S. Treasury’s Financial Stability Oversight Council (FSOC), the AALU, Washington, requests that the FSOC “clarify” that the two insurance arrangements are not included in restrictions that apply under the rule to investments by banking entities in hedge funds and private equity funds.

The two arrangements include: (1) investments in life insurance products supported by an unregistered, separate account of an insurance company whose underlying investments are limited to assets eligible for investments by a national bank under the National Bank Act; and (2) investments in life insurance products supported by an unregistered, separate account of an insurance company to hedge obligations of banks under deferred compensation programs for bank personnel.

“The Volcker Rule clearly does not prohibit the purchase and holding of general account life insurance products by banking entities, nor does it prohibit the purchase and holding of registered separate account life insurance products that do not rely upon the section 3(c)(10 and 3(c)(7) exemptions [of the Investment Company Act],” the AALU states in its comment letter. “Despite the fact there are strong arguments that the Volcker Rule does not prohibit banking entities from purchasing and holding unregistered separate account products, there is some ambiguity which should be clarified.”