Legislation was introduced in the Senate late Thursday that would provide the Federal Reserve Board with the authority it needs to tailor capital standards of insurers it oversees.
The bill was introduced with bipartisan support by five senators, signaling that it has support strong enough to allow it to pass the Senate. There also appears to be strong support to do so in the House.
However, the House leaves for its August recess next Wednesday, July 31, and the Senate next Friday, August 2, so it is unlikely the legislation will receive congressional action until the fall.
The House and Senate both reconvene September 9.
The American Council of Life Insurers (ACLI) immediately issued a statement voicing strong support for the legislation.
Both life and property casualty insurers, as well as their trade groups, have been urging both the Fed and Congress to provide such flexibility since the Fed started to implement the Dodd-Frank financial services reform law last year.
In comments to members of Congress through testimony and correspondence, the Fed has strongly signaled it is prepared to regulate insurers under capital standards more applicable to them, but that Sec. 171 ties its hands, and it needs legislation specifically addressing the issue.
In a final rule published July 2, the Fed gave Congress time to act when it provided insurers a respite until 2015 from the Basel III capital regimen.
The Fed has interpreted the language of Sec. 171 as requiring federal agencies to apply consolidated minimum risk-based and leverage capital requirements for bank holding companies and savings and loan holding companies, “that are no less than the generally applicable capital requirements that apply to insured depository institutions under the prompt corrective action framework” imposed under a 1991 law.