U.S. Senator Susan Collins (R-Maine) has introduced a bill, S.2012, in an effort to clarify the application of Section 171 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) to insurance companies. Section 171 (codified at 12 U.S.C. 5371) requires insured depository institutions, depository institution holding companies, and nonbank financial companies to maintain certain capital levels on a consolidated basis (i.e., Basel III global capital standards). Insurance companies who are deemed regulated entities under the Dodd-Frank Act are concerned that Section 171 would impose capital standards that are in addition to, and potentially in conflict with, those standards already imposed by state insurance departments. The bill would amend Section 171 to explicitly state that the Federal Reserve is permitted (although not required) to exclude domestic and foreign insurance companies of large financial holding companies when determining the minimum capital requirements on a consolidated basis.
In her comments to the Senate Subcommittee on Financial Institutions and Consumer Protection, Senator Collins stated, “While it is essential that insurers subject to Federal Reserve Board oversight be adequately capitalized on a consolidated basis, it would be improper, and not in keeping with Congress’s intent, for federal regulators to supplant prudential state-based insurance regulation with a bank-centric capital regime for insurance activities. Indeed, nothing in Section 171 alters state capital requirements for insurance companies under state regulation.”
For Senator Collins’s complete Subcommittee statement, click here.
Lastly, as we reported here, legislation was introduced last year in the House of Representatives concerning the application of Section 171 to insurance companies. The legislation was referred to the House Committee on Financial Services last May, and no further action has been taken to date.