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.”
The FSOC solicited AALU’s comments for its work on rules to implement the Volcker rule, formally known as Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The AALU cited supported the exception from Senate Banking Committee Chairman Christopher Dodd.
Section 619 authorizes federal banking agencies and other specified federal regulators to allow an activity which “would promote the safety and soundness of the banking entity and the safety and financial stability of the United States.” the AALU pointed out.