In a letter dated November 10, 2013 (the “Letter”) to the United States Senate Banking Committee (the “Committee”), the National Association of Insurance Commissioners (“NAIC”) showed support for Committee members seeking to address the potential confusion regarding capital and leverage requirements for insurers regulated by the Federal Reserve due to being either considered (1) a thrift holding company, or (2) a systemically important financial institution as designated by the Financial Stability Oversight Council.

The Letter emphasizes the importance of preserving “the walls around insurance legal entities that have protected policyholders for more than 150 years.”  Such walls, the Letter contends, “ensure that a company has the ability to pay out claims to insurance consumers who purchased insurance to protect their home, their livelihood, or their retirement.”  Specifically, in the Letter, the NAIC cautioned Committee members that under the Dodd-Frank Act, the Federal Reserve may require non-bank companies (e.g., insurers organized as thrift holding companies) to prop up a troubled bank, even if it means such assistance could be to the detriment of insurance policyholders.  Under such circumstances, the Letter states the “consent of the appropriate state insurance regulator should remain a requirement for any capital transfer with the potential to affect policyholder protections.”