Congress should continue to pressure federal regulators to carefully tailor recently proposed capital standards to accommodate the unique business model of savings and loan holding companies primarily engaged in the business of insurance, Jimi Grande, senior vice president of federal and political affairs of the National Association of Mutual Insurance Companies, said today.
The House Financial Services Subcommittees on Insurance, Housing, and Community Opportunity and Financial Institutions and Consumer Credit held a joint hearing this morning to learn more about the impact of the proposed rules to implement Basel III capital standards. Dodd-Frank, through the “Collins Amendment,” requires the Federal Reserve to establish minimum leverage and risk-based capital requirements on depository institution holding companies. Some insurers that also own thrifts are organized as savings and loan holding companies (SLHCs). Sen. Susan Collins, R-Maine., recently sent regulators a letter making clear the intention of her amendment was not to supplant state-based capital standards for insurers with a bank-centric capital regime at the federal level.
"Fundamentally, the proposed capital standards are not appropriate for SLHCs that are predominately engaged in insurance,” said Grande. “The proposed rules reflect banking standards that bear no meaningful relationship to the allocation of capital and use of leverage in the insurance world."
In a letter sent to both subcommittees yesterday, NAMIC argued that the Federal Reserve has proposed implementing the Collins Amendment in a rigidly bank-centric manner. As a result, insurers are confronting tremendous and needlessly added uncertainty concerning the rules of the road governing capital allocation and how capital should be deployed in the future. The letter urged lawmakers to make clear to the implementing agencies that they should work with insurance regulators and industry stakeholders to develop standards that are appropriate for insurers.
"Just as insurance capital standards would not work well for banks, bank capital standards do not work well for insurance companies or the regulators who supervise them,” Grande said. “The regulators testifying today all said that appropriate capital standards for insurance SLHCs was an issue they were seriously considering as they go forward. It is our hope that the final rules will recognize the unique nature of the insurance industry and develop appropriate capital standards."
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Public Affairs Director - Federal Affairs