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February 05, 2013 at 10:00 AM
As the insurance world awaits the insurance modernization report from Treasury’s Federal Insurance Office (FIO), perhaps in the coming week or weeks, the pace of discussion between insurers and federal regulators continues, a federal regulation is already here, or imminent, for some.
MetLife and other insurers, in a variety of capacities, continue to meet with Federal Reserve Board (FRB) members to make a case for the need for regulation to be insurance-company specific, and not done under the same model as that for what it views as a very different animal: banks.
Financial institutions regulated by the Fed, which now include about two dozen insurers – and could increase to more – are subject to its prudential standards, and some will also face enhanced capital standards if found to be systemically important through an ongoing process. The first fruits of this process are expected to be announced after meetings with the companies and final details are worked through.
On Jan. 25, Federal Reserve Board staff and four representatives of MetLife, Inc. met to discuss MetLife’s views on the board’s proposed approach to imposing regulatory capital requirements on insurance holding companies.
This perhaps refers to the Basel Committee on Banking Supervision’s Basel III for liquidity risk measurement, standards and monitoring of banks and thrifts under the Fed’s purview, here in the U.S. It requires the imposition of enhanced capital standards, originally designated to have gone into effect Jan. 1, and which have been delayed by the Fed by request.
The proposals had given an effective date of Jan. 1, 2013, and insurance companies with thrifts are to be subject to the new capital rules, as well, when they are effective.
Fed regulators, led by the Board of Governors of the Federal Reserve System, want to use the capital standards to provide consolidated regulation of insurers which operate thrifts. The rules were proposed in June and a comment period given, and then delayed until Oct. 22 after pressure from banks, insurers and a Congress unhappy with the new standards and the short time frame.
The proposal would subject institutions that have thrift holding companies to the same capital standards as banks at the holding company level, except for certain unique insurance activities.
