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Senators Say Bank Capital Requirements Don’t Apply to Insurers

According to a bipartisan group of 24 U.S. senators, insurers should be excluded from new capital requirements for banks because those requirements could ultimately harm policyholders, retirees, and those working to increase their savings...
October 23, 2012

According to a bipartisan group of 24 U.S. senators in an Oct. 17 letter to the U.S. Federal Reserve Chair Ben Bernanke, U.S. Comptroller Thomas Curry, and acting Federal Deposit Insurance Corp. Chair Martin Gruenberg, insurers should be excluded from new capital requirements for banks because those requirements could ultimately harm policyholders, retirees, and those working to increase their savings. The letter says that the new capital requirements do not account for the “distinct nature of the insurance business,” and they do not reflect the risk-based capital requirements insurers must meet under the U.S. state-based regulatory regime for insurers.

“While robust capital standards are a critical component in any prudential supervisory regime, applying a bank-centric regulatory capital regime to insurance entities creates serious challenges for insurance companies, and potentially policyholders,” the letter said. The senators, led by Sen. Sherrod Brown (D-Ohio) and Sen. Mike Johanns (R-Neb.), said that Congress did not intend for the Dodd-Frank Act and its related financial rules to undermine the state risk-based capital system and replace it with a banking capital regime. In fact, the letter said, the Senate passed legislation that directed bank regulators to consider the existing regulatory requirements that apply to insurers. “Any financial regulations should reflect the will of Congress to respect the distinctions between insurance and banking” the letter said.