It was not Congress' intent that federal regulators "supplantstate-based regulation with a bank-centric capital regime," Sen.Susan Collins, R-Maine, says in a Nov. 26 letter to Federal ReserveChairman Ben Bernanke and other U.S. banking regulators.

Collins is the author of the "Collins Amendment" in the DoddFrank Act, which requires bank holding companies to be subject tocertain capital requirements. Insurers and NAIC staff have saidthey have had conversations with Collins' staff and requested shetell the Fed her intent was not to subject insurers to strict bankcapital standards if the Fed was their prudential regulator. InOctober, someSenators made that case, and now Collins is adding to theircollective voice. 

Her letter tells the crafters of capital rules that insurancecompanies should be treated differently from banks, andher intent was not to have them treated the same, a point which theindustry and the National Association of Insurance Commissionershave been making to the Fed and others. Washington lobbyists hadhoped Collins would chime in, and now she has, a day before ascheduled hearing on Basel III capital standards implementationbefore a joint hearing before the Insurance, Housing and CommunityOpportunity and Financial Institutions and Consumer CreditSubcommittees.

Kevin McCarty, Florida Insurance Commissioner is scheduled totestify on behalf of the NAIC as the association's president.

The trouble for insurers is that the amendment ropes in theroughly two dozen that have savings and loans/thrifts, includingTIAA-CREF, The Principal Financial, Nationwide, USAA, CountryFinancial and Mass Mutual. These savings and loan holding companies(SLHCs) are subject to proposed rules under development by thefederal banking regulators, and do not have the compliance delaybuilt in for foreign-owned banks.

"I do not understand why the proposed rules fail to implementthis provision, as required by Congressional intent and the clearlanguage of the statute," Collins wrote in the letter, referring toa delay applying to SLHCs.

Collins adds that companies will need time to adjust theirbalance sheets in order to comply with the new capital standards.They were to go into effect Jan.1, 2013, but on Nov. 9, the three U.S. federalbanking agencies delayed the implementation date aftera massive campaign by insurance (and banking) industrylawyers. 

Also, Collins championed the industry's main line of thoughtwith regard to these standards in that "consideration should begiven to the distinctions between banks and insurance companies, apoint which Chairman Bernanke rightly acknowledged in testimonybefore the House Banking Committee this summer."   

Banks and insurers typically have different composition ofassets and liabilities, since it is fundamental to insurancecompanies to match assets to liabilities, unlike most banks, shesaid.

The American Council of Life Insurers (ACLI) says it welcomedCollins' letter.

"The agencies' decision to delay implementation of Basel III isunderstandable given the complexities of the issue. As stated inour October 12 comment letter, ACLI supports the application ofrisk-based capital standards for insurers over the bank-centriccapital standards from Basel III," stated the ACLI after theinitial delay.

In a letter to the Fed last month, NationwideMutual Insurance Company said the Basel IIIregulation, if adopted as proposed, "could threaten the existenceof the savings and loan holding company industry."

Insurance CFOs suggested in an Oct. 22 letter to thebanking regulators that because insurance companies that havesavings and loans have not been regulated by the Fed previously,new capital requirements should not be applicable until July15.

"Such companies have never been subject to Basel requirementsand this extremely short transition period is unduly burdensome andcontrary to the express intent of Congress in the CollinsAmendment," the CFO letter said.