A picture of Senator Mike Johanns
Mike J.
Former Republican NE
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    Insurance Capital Standards Clarification Act of 2014

    by Former Senator Mike Johanns

    Posted on 2014-12-10

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    Read More about Insurance Capital Standards Clarification Act of 2014

    JOHANNS. I am an original cosponsor of this legislation and appreciate your long-standing partnership on this issue. The bill clarifies that, in establishing the minimum leverage capital and risk- based capital standards under section 171, the Federal Reserve Board is not required to include activities or companies that are engaged in the business of insurance and are subject to State insurance regulation, including State insurance capital requirements. Similarly, regulated foreign affiliates or subsidiaries engaged in the business of insurance and subject to foreign insurance regulation and foreign insurance capital requirements that have not been deemed to be inadequate also may be excluded from section 171 capital standards. We believe it is worth noting that the Government Accountability Office found that the State risk-based capital rules performed well during the financial crisis.



    The bill allows the insurance capital requirements that have been effective to continue to determine the capital requirements for the activities of insurance companies and groups that are supervised by the Federal Reserve Board. Furthermore, activities of a holding company supervised by the Federal Reserve Board that are not the business of insurance would remain subject to the capital standards under section 171. In determining insurance versus non-insurance activities of a supervised entity, the legislation provides regulators with the flexibility to tailor the rules for certain affiliates or subsidiaries of insurance companies that are necessary to the business of insurance, including, for example, affiliates or subsidiaries that support insurance company general and separate accounts.

    Our legislation defines ``business of insurance'' by reference to section 1002 of the Dodd-Frank Act, and under this definition the business of insurance means ``the writing of insurance or the reinsuring of risks by an insurer, including all acts necessary to such writing or reinsuring and the activities relating to the writing of insurance or the reinsuring of risks conducted by persons who act as, or are, officers, directors, agents, or employees of insurers or who are other persons authorized to act on behalf of such persons.'' The reference to this definition of the ``business of insurance'' will help ensure that insurance activities of federally supervised companies are subject to tailored capital rules, whether those activities are undertaken by the insurance companies themselves or by their affiliates or subsidiaries on their behalf.

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