Federal Reserve Solicits Comments on Capital Requirements for Insurance Companies

The Board of Governors of the Federal Reserve System (“FRB”) solicited comments on an advanced notice of proposed rulemaking regarding regulatory capital requirements for insurance companies.

The FRB suggested using two frameworks for these requirements: the “consolidated” approach and the “building block” approach. The consolidated approach applies to nonbank financial companies that will be supervised by the FRB and cover significant insurance activities (“systemically important insurance companies”). The building block approach applies to depository institution holding companies that are engaged in insurance activities (“insurance depository institution holding companies”) but that also own banks or thrifts.

Governor Daniel K. Tarullo stated: “the dual approach proposed today is another example of our efforts to tailor capital regulation to the different risks posed by financial intermediaries of varying types and complexity.”

Comments on the proposal must be submitted by August 2, 2016.

Lofchie Comment: How will state insurance regulators respond to the federalization of insurance regulation – especially as to its effect on insurance companies that are not affiliated with banks?