In an action commended by the National Association of Insurance Commissioners (NAIC), the U.S. House of Representatives passed the “Policyholder Protection Act of 2015” on November 16, 2015. The bill, which is widely supported by the insurance industry as a measure of policyholder protection from non-insurance financial failures, now goes to the U.S. Senate for consideration.
The bipartisan proposal was introduced in March in both chambers of Congress, as H.R. 1478 and S. 798, to clarify Congressional intent with respect to the Dodd Frank Act that state insurance regulators continue to have primary authority to resolve failing insurers, and to protect insurance consumers where the insurer is affiliated with a bank or thrift which is subject to federal regulation. The proposal also seeks to amend the Federal Deposit Insurance Act to provide notice to state insurance regulators during the resolution of a systemic entity, in order to protect of the capital of insurers that are part of larger financial institutions.
Under the legislation, state insurance regulators have the express authority to protect insurance company assets for the benefit of insurance consumers, and federal banking regulators are prevented from transferring the assets of insurers and their subsidiaries if the state insurance commissioner deems such a transfer harmful to the insurer and its policyholders. The proposal further prevents the Federal Deposit Insurance Corporation (FDIC) from placing liens on the insurer’s assets without the approval of the state insurance regulator.
The bill, which may be accessed here, is designed to ensure that insurance assets are protected for the benefit of policyholders in order to pay claims and highlights the success of the state regulation of insurers.