Global regulatory efforts on insurance group capital standards are accelerating this summer, with significant activity by three oversight bodies — the Federal Reserve Board of Governors (FRB), the National Association of Insurance Commissioners (NAIC) and the International Association of Insurance Supervisors (IAIS).
For insurers falling within more than one of these regimes, navigating these evolving requirements, with their areas of overlap and tension, will require considerable care.
Federal Reserve-proposed rulemaking
In early June, the FRB issued an advanced notice of proposed rulemaking, with a comment solicitation, on capital standards for two types of insurers and their affiliates:
- Insurers under FRB supervision based on their potential threat to U.S. financial stability (so-called "systemically important financial institutions" or SIFIs); and
- insurers that are holding companies for insured depository institutions (IDIHCs) such as a savings and loan holding company.
The Dodd-Frank Wall Street Reform and Consumer Protection Act empowers the FRB to impose capital standards on insurance SIFIs and IDIHCs while permitting the FRB to "tailor" such standards for the insurance characteristics of their operations. The FRB's June guidance proposes two alternative methodologies for computing such capital requirements.
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