Federal Reserve Board officials are making clear that they have a wait-and-see attitude about support for international initiatives aimed at establishing uniform capital standards for insurance companies.
For example, at a House hearing last week, the agency’s general counsel, Scott Alvarez, said they “have a good working relationship” with state-insurance regulators, and “want to be educated” about insurance regulatory standards as it assumes responsibility for insurance oversight through provisions of the Dodd-Frank Act (DFA).
At the House hearing, Alvarez would only say that crafting uniform international capital standards “is something that we think is worth exploring,” but that the Fed has “no pre-determined idea on how to do that.” The hearing was held by the full House Financial Services Committee last Wednesday.
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Rep. Randy Neugebauer, R-Texas, noted at the hearing that state insurance regulators oppose the international effort, which is being undertaken by the Financial Stability Board (FSB) under a directive to the International Association of Insurance Supervisors (IAIS).
In response to a question from Neugebauer, Alvarez made clear that the FSB “is not the Federal Reserve.”
That didn’t stop Neugebauer and Rep. Dennis Ross, R-Fla., from disclosing that they have written a letter to the Government Accountability Office asking it to analyze developments overseas on international capital standards for insurers and report on the impact such standards would have on domestic insurers and policyholders.
In the letter, Neugebauer and Ross noted that “there has been little cost-benefit analysis” of the need to globalize a holding company capital standard, or how a potential requirement for state insurance regulators to use such a standard would impact U.S. insurers and consumers.
In questioning Alvarez, Neugebauer also said creation of international capital standards “is something not supported by our own state regulators.”
Alvarez replied by saying, “We look forward to working with,” and “have a very good working relationship with the state insurance commissioners.”
Alvarez also said the Fed “has just gotten responsibility” under DFA for supervising systemically important institutions, a couple of which include insurance companies and savings and loan holding companies, which include a number of insurance companies.
“So we’ve begun discussions with insurance companies directly to understand their business model, to understand the capital regime that they’re under, the supervisory regime they’re under,” Alvarez said. He said Fed officials are also meeting with the NAIC and in particular certain lead insurance regulators to understand the framework. We want to be educated there.”