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US: Federal Reserve previews forthcoming insurance capital rules

In prepared remarks before the American Council of Life Insurer’s Executive Roundtable (Naples, Florida, 9 January 2019), Federal Reserve Board (FRB) Vice Chairman for Supervision Randal Quarles provided the insurance industry with a high-level overview of the FRB’s forthcoming proposal on consolidated capital requirements for insurers supervised by the FRB.

Background

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) gave the FRB regulatory responsibilities both for insurance holding companies that own a federally insured bank or thrift and for insurance companies designated as systemically important by the U.S. Financial Stability Oversight Council (so-called SIFIs), the former of which represent approximately 10 percent of the U.S. insurance industry. With Prudential’s de-designation in October 2018, no insurer currently has the SIFI label.

In June 2016, the FRB published an advance notice of proposed rule-making (ANPR) describing two potential regulatory capital frameworks for FRB-supervised insurers: a capital framework, styled as a “building block approach,” to be applied to savings and loan holding companies or bank holding companies with significant insurance activities and a “consolidated approach” applicable to insurer SIFIs.

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