U.S. Sen. Susan Collins, R-Maine, attempted to clarify heramendment to the Dodd-Frank Act last week through statements to aSenate committee and the introduction of legislation, moves that aratings agency says is credit positive for systemically importantinsurers.

The “Collins Amendment,” or Section 171 of the Dodd-Frank Act,“requires that the Fed impose minimum capital and leveragerequirements on all non-bank systemically importantfinancial institutions (SIFIs),” Moody's Investors Servicesays in its Weekly Credit Outlook.

Collins told a Senate Banking subcommittee last week that her amendment“allows the federal regulators to take into account thedistinctions between banking and insurance, and the implications ofthose distinctions for capital adequacy.”

Her legislation, S. 2102, clarifies the intent of her amendmentand the application of leverage and risk-based capitalrequirements, Moody's says. “For insurers subject to FederalReserve oversight, a minimum capital standard that reflects theunique attributes of the insurance industry is credit positive,”the ratings agency states.

Moody's contends that forcing “a strict bank-centric model uponinsurers could result in capital requirements less conservativethan intended because of misalignment with insurance-companyrisks.”

The ratings agency adds that a bank-centric model could lead to“potentially onerous capital requirements” for insurers designatedas systemically important financial institutions (SIFIs), whichcould in turn sour investors who find returns unattractive at thosehigh capital levels.

Moody's says the Fed was unable to take the differences betweeninsurers and banks into account under Dodd-Frank, but Collins'clarification should help in that regard.

“Tailoring non-bank SIFI regulations for insurance companieswould maintain an insurer's operational flexibility and provide fora level playing field,” says Moody's. “Non-bank SIFIs under Fedregulation are less likely to take actions that would adverselyaffect their financial profile and are more likely to retainearnings and capital.”