Trade bodies back Dodd-Frank reforms
Insurance industry trade bodies have backed a series of bills intended to clarify the federal requirements imposed on insurers that fall under the supervision of the Federal Reserve as part of the 2010 Dodd-Frank Act.
The bills were discussed at a 20 May hearing on legislative proposals to reform domestic insurance policy, held before the Housing and Insurance subcommittee of the House Financial Services committee.
Traditionally, insurers were largely regulated at a state level, but Dodd-Frank authorised greater federal influence and enabled the Federal Reserve to supervise non-bank financial companies deemed Systemically Important Financial Institutions (Sifis).
The bills included the Insurance Capital Standards Clarification Act, which would ensure that the Federal Reserve can apply insurance-based capital standards to the insurance operations of a business, while keeping bank capital standards for the banking section.
Speaking on behalf of the Property Casualty Insurers Association of America, Joseph Kohmann, chief financial officer and treasurer of US insurer and bank Westfield Group, said: "The theme of all these bills is that insurance and banking regulation are fundamentally different."
"PCI and Westfield support strong regulation. But our growth is being restrained by unintended consequences stemming from an expansion of banking regulation in the Dodd-Frank Act that conflicts with state insurance regulation," Kohmann explained.
Another bill, the Insurance Consumer Protection and Solvency Act, would clarify that state rather than federal insurance laws should govern the liquidation of an insurance company.
Thomas Karol, federal affairs counsellor at the National Association of Mutual Insurance Companies, commented: "All insurance companies already meet guaranty fund obligations for the insolvencies in their own industry and should not be assessed for the costs of failures in other parts of the financial services sector."
Other bills under discussion included the Policyholder Protection Act, which would enable a state insurance regulator to intervene to protect the solvency of an insurer affiliated with a failing bank.
The Insurance Data Protection Act, meanwhile, would limit federal authority to use a subpoena to request data from insurance companies.