A spokesman for the life insurance industry today said it is "imperative for Congress" to act promptly to give the Federal Reserve Board the statutory latitude to develop insurance-based capital standards for insurance companies.
The comment by Gary Hughes, ACLI executive vice president and general counsel, was made at a congressional hearing where both life and property casualty industry trade groups urged Congress to promptly pass legislation designed to partly roll back federal authority to oversee or monitor insurance companies enacted as part of the Dodd-Frank financial reform act's efforts to prevent another American International Group collapse.
The hearing was held to discuss legislative proposals aimed at "reforming" domestic insurance regulatory policy. It was convened by the Subcommittee on Housing and Insurance of the House Financial Services Committee.
One member of the committee, Rep. Ed Royce, R-Calif., questioned some of the legislative proposals advocated for by representatives of the property casualty insurance industry who testified at the hearing.
Royce said he envisions the "new normal for insurance regulation" being "a hybrid model with layered regulation by states and the federal government."
Royce concluded that "regulation can take place at the federal level but it must be smart and specific to insurance operating models."
The bill Hughes encouraged the panel to report out is H.R. 4510, the Insurance Capital Standards Clarification Act of 2014.
It would clarify Sec. 171 of the Dodd-Frank Act, the "Collins amendment," so that the Federal Reserve Board (FRB) will be allowed to use separate capital standards for insurers and banks under its supervision and to provide that insurers can use statutory accounting principles in filings to the Fed.
Fed lawyers have advised agency officials that the agency is required by Sec. 171 to use Generally Accepted Accounting Principles instead of statutory accounting principles in evaluating the financials of Systemically Important Financial Institutions (SIFI), such as AIG and Prudential Financial, or insurers which operate thrift holding companies.
Hughes testified that in July 2013, the FRB issued final rules implementing bank-centric Basel III for savings and loan holding companies. Recognizing that life insurers should not be held to a banking standard, the FRB issued a temporary exemption for companies that are primarily life insurers.
