The White House appears likely to support legislation allowing the Federal Reserve Board to apply insurance-based capital standards to the insurance portion of any insurance holding company it oversees, the president and CEO of the American Council of Life Insurance said today.
Indeed, the bill will be “well-received at the White House,” Dirk Kempthorne said at the opening general session of the ACLI annual conference, now underway at the JW Marriott Hotel in Washington.
There are two different versions of the legislation, both aimed at amending the so-called “Collins amendment” to the Dodd-Frank Act that will clarify that the Federal Reserve Board clarifying that the Fed can use State Accounting Principles, or SAP, in overseeing insurers regulated as systemically important financial institutions, or those that operate thrift holding companies.
Kempthorne also said the administration is open to listening to the industry’s concerns about the Department of Labor’s initiatives for creating a fiduciary standard for sale of investment products regulated under the Employee Retirement Income Security Act or ERISA.
Kempthorne said he raised this issue with Denis McDonough, White House chief of staff, when he met with McDonough on the Fed regulation issue. Kempthorne said the DOL proposal would create a “one-size-fits all regulatory approach to sales and distribution” of retirement products regulated under ERISA.
“In practice, it would make it difficult, if not impossible, for agents and brokers to assist retirees with their lifetime income needs,” Kempthorne said in his comments today. He also said the DOL proposal “would likely limit or eliminate the availability of the very guidance that middle and low income Americans need.”
He said this issue was also discussed at a meeting “just last Wednesday” with Labor Secretary Thomas Perez and Jeffrey Zients, assistant to the president for economic policy.
Kempthorne said he told Perez and Zients that “the imposition of ERISA fiduciary duties on all agents and brokers is both impractical and unnecessary,” and he noted that “agents and brokers already are heavily regulated by the states and the SEC.” Moreover, he said, “the insurance sales industry is well regulated and policed.”
Kempthorne said Perez and Zients “indicated that they want to work with us,” and that the ACLI will “take them up on that offer. Specifically, Kempthorne said, the ACLI will be scheduling work sessions with staff from DOL and the National Economic Council to help further educate them about the consumer protections in place at the state and federal level and the adverse, unintended consequences of an expanded fiduciary rule.
In his comments, Kempthorne made clear the urgency of the ACLI and member company concern about the DOL fiduciary standard issue.
“The most important issue to keep in mind is that Americans need education and help in planning for retirements that are lasting longer and longer,” he said. “Agents and brokers are among the financial professionals that play that role, and they do it very well.”
Kempthorne talked at length about the insurance regulatory issue, saying “almost 60 percent of life insurance groups measured by assets will be subject to regulation, direct or indirect, by authorities other than the states.”
In comments at a meeting of small insurance companies Sunday, the Forum 500, Bruce Ferguson, senior vice president, state relations, said this is a “fascinating time in the world of insurance regulation,” adding that it is “mind-boggling what is happening.”
As to the Fed/SAP issue, the House has passed the “Insurance Capital Standards Clarification Act of 2014,” H.R. 5461, and the “Insurance Capital Standards Clarification Act of 2014,” or S. 2270.
The Senate bill is simple legislation that merely clarifies that SAP can be used by the Fed in overseeing insurance companies. However, the House bill contains provisions unacceptable to the Senate, so Congress is unlikely to act on the House measure until December, at a lame-duck session that will follow the mid-term elections.
In his speech, Kempthorne said a group of ACLI officials and representatives of both large U.S. insurance companies, stock as well as mutual, and European-based insurance companies have met with several Fed governors to discuss capital standards, group supervision, interest rates, “and a number of other federal and international regulatory issues facing the industry.”
The result is the scheduling of “work sessions between ACLI members and Fed staff to get to know one another and to understand this unique industry,” Kempthorne said. He also said ACLI officials and industry officials will meet with members of the Fed board again early next year to “follow up on industry issues.”