Federal agencies are proposing swaps regulations that would exclude insurance products written by regulated insurers from the definition of the term “swap.”
Members of the U.S. Securities and Exchange Commission (SEC) voted 5-0 to release a draft of the proposed definition for public comment, and members of the U.S. Commodity Futures Trading Commission (CFTC) voted 4-1 to release the draft.
Staffers at the SEC and the CFTC have developed the definition to implement provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act that require the agencies to work together to set up a new system for regulating “swaps” and “security-based” swaps.
The agencies have proposed a broad definition that would include many types of arrangements with terms that depend on the occurrence, nonoccurrence or partial occurrence of future events with economic or commercial consequences.
The proposed definition of “swap” would provide that certain types of products would automatically qualify as insurance, and not as swaps or security-based swaps “if offered by a regulated insurance company,” CFTC officials say in a swaps definition fact sheet.
“These products are surety bonds, life insurance, health insurance, long-term care insurance, title insurance, property and casualty insurance, and annuity products the income on which is subject to tax treatment under Section 72 of the Internal Revenue Code,” officials say.