The American Council of Life Insurance (ACLI) is expressing concern to the Federal Reserve Board and other federal banking agencies over a proposal that suggests insurance companies with thrifts or savings and loans would be required to account for their total consolidated liabilities in accordance with U.S. GAAP, not the traditional statutory accounting principles.
These companies are not required under state insurance law to prepare financial statements in accordance with GAAP now, although public companies do file GAAP, but mutual firms do not need to file GAAP and do not for statutory accounting purposes.
"In effect, these insurance companies would be required to create entirely new accounting procedures and systems simply to produce the single number called for…," wrote Julie A. Spiezio, ACLI SVP and deputy general counsel in a letter to the federal banking agencies.
"This requirement would be extraordinarily burdensome, costly and inappropriate," she argued. "Imposing such a requirement is not in keeping with the council's (Financial Stability Oversight Council) own recommendation."
Section 622 of the Dodd-Frank Act establishes a financial sector concentration limit that generally prohibits a financial company from merging or consolidating with, acquiring most of the assets, or acquiring control of another company if the acquisition would result in consolidated liabilities topping 10 percent of the aggregate consolidated liabilities of all financial companies.
FSOC was required under the Dodd-Frank Act's section 622 to make recommendations regarding modifications to the financial sector concentration limit, Spiezio said.
The Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency (OCC) requested comment in February on proposed revisions to agency information collection activities in the area of consolidated reports of condition and income.
The banking agencies are proposing to implement a number of revisions to the Call Reports requirements in 2013.
The revision would add a new item applicable to a bank or savings association that is a subsidiary of a parent holding company like an insurance company.
It would require the company or subsidiary to report annually the total consolidated liabilities of its parent holding company for the Fed's oversight of the financial sector concentration limit established by section 622.
