Insurers that own a savings and loan bank are hoping that legislation designed to streamline oversight by the Federal Reserve will be taken up by the Senate Banking Committee in the lame-duck session of Congress after the midterm elections, if not in the new year.
The House handily passed by voice vote in mid-September a slimmed-down version of the State Insurance Regulation Preservation Act, H.R. 5059, which was introduced by Reps. Keith Rothfus, R-Pa., and Joyce Beatty, D-Ohio.
The bill is now before the Senate Banking Committee.
Owning a thrift automatically places insurers under Fed supervision in addition to oversight from their domiciliary state insurance regulator and other states in which they do business.
Insurers are seeking efficiencies in the federal-state system by banishing overlapping or redundant supervisory requests in favor of a system that recognizes their primary structure as an insurer.
There are fewer than a dozen insurance savings and loan holding companies (ISLHC) remaining, down from almost 30 after passage of the 2010 Dodd-Frank Act.
Currently, the Fed is working on capital standards for the ISLHCs under a framework called the “building-block approach,” which is seen as not too dissimilar from state regulatory measurements, although the rules are not yet final.
Jack Dolan, spokesman for the American Council of Life Insurers, told ThinkAdvisor that the Fed’s oversight “must take into consideration the unique aspects of the business of insurance and the state-based regulatory system.”
Dolan called the bipartisan legislation flexible and tailored to insurance entities, without precluding federal regulation in certain circumstances.
The bill also “reaffirms McCarran-Ferguson and the primacy of state regulation of insurance,” Dolan said.
ISLHCs have Fed examiners on site daily and are subject to continuing exams and data requests, as some have noted in testimony and commentary that some information sought can already be gotten from state regulators while many of the reporting forms are designed for banks.
Retirement services giant TIAA has been lobbying for the measure to craft supervision to a more insurance-centric model.
“The State Insurance Regulation Preservation Act will address redundancy and inefficiency in this system by requiring the Fed to develop a supervisory framework that strengthens alignment with state regulators on day-to-day oversight,” Sam Hodas, senior director of federal government relations for TIAA, told ThinkAdvisor.
“TIAA, along with a coalition of other ISLHCs, played a lead role in moving this legislation through the House, and will continue to advocate for its passage.”
Some big insurers got out of the banking business, including Nationwide, which announced in May it would move banking deposits to another institution while retaining its successful trust operations to focus on retirement plan clients, according to the company and press reports at the time.
TIAA, meanwhile, has committed to growing its bank operations. It closed a deal to buy EverBank in Jacksonville, Florida, last year.
— Check out Companies Make Big Push for Lifetime Income Awareness on ThinkAdvisor.