WASHINGTON, D.C. – The United States Senate tonight unanimously passed legislation introduced by U.S. Sens. Susan Collins (R-Maine), Sherrod Brown (D-Ohio), and Mike Johanns (R-Neb.) to clarify that a provision in the 2010 Dodd-Frank law provides the Federal Reserve with the authority to take into account the significant distinctions between banking and insurance when setting capital standards. This bipartisan clarifies the Federal Reserve’s authority to recognize the distinctions between banking and insurance

"There is broad bipartisan agreement that providing traditional life, property, and casualty insurance is different from banking,” Brown said. “I want strong capital standards, but they have to make sense. Applying bank standards to insurers could make the financial system riskier, not safer.  That is why the Federal Reserve must recognize the differences between the industries and ensure that institutions engaging in insurance are not held to the same capital requirements as traditional banks."

“Section 171 of the Dodd-Frank law allows federal regulators to take into account the significant distinction between banking and insurance,” Collins said.  “The Federal Reserve has acknowledged this important distinction, but has repeatedly suggested that it lacks the legal authority to differentiate between the two types of business models. Our legislation clarifies that authority.”

“It never made sense to treat insurance companies like big banks to begin with,” Johanns said. “This clarification gives peace of mind to local insurers that they no longer have to worry about more one-size-fits-all regulation and it also gives consumers the reassurance that new regulations won’t force rate increases. I’m pleased the Senate unanimously agreed to this commonsense regulatory fix - the first to Dodd-Frank - and the House should act quickly on their companion legislation.”

Specifically, the Capital Standards Clarification Act of 2014 would:

  • Add language to Section 171 to clarify that, in establishing minimum capital requirements for holding companies on a consolidated basis, the Federal Reserve is not required to include insurers to the extent they are engaged in activities regulated as insurance at the state level;
  • Provide a mechanism for the Federal Reserve, acting in consultation with the appropriate state insurance authority, to provide similar treatment for foreign insurance entities within a U.S. holding company where that entity does not itself do business in the United States; and
  • Limits the ability of the Federal Reserve to require insurers which file holding company financial statements using Statutory Accounting Principles to instead prepare their financial statements using Generally Accepting Accounting Principles. 

In March, Sen. Brown chaired a hearing of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection entitled “Finding the Right Capital Regulations for Insurers.” The hearing, at which Sen. Collins provided testimony, examined whether capital requirements under the Collins Amendment require insurance companies to adhere to the same capital standards as traditional bank holding companies (BHCs).

###