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SEC Ponders Calls for Insurance Exemption to Volker Rule

The U.S. Securities and Exchange Commission is weighing industry calls to exempt insurance companies from the Volcker Rule, a provision of the Dodd-Frank Act that bars financial institutions from certain kinds of speculative investing
March 13, 2012

The U.S. Securities and Exchange Commission is weighing industry calls to exempt insurance companies from the Volcker Rule, a provision of the Dodd-Frank Act that bars financial institutions from certain kinds of speculative investing. Industry trade organizations argue that unless the exemption is granted, insurers could face severe financial pressures because many companies invest in hedge funds as a way to bolster their solvency and their ability to pay claims.

The Volcker Rule, named for former United States Federal Reserve Chairman Paul Volcker, is designed to keep commercial banks from proprietary trading and limits their ability to invest in hedge funds. Last year, the Financial Stability Oversight Council said two types of insurers are subject to the Volcker Rule: those that are affiliates of insured banks or thrifts and nonbank financial companies supervised by the Federal Reserve. Driven in part by the application of the Volcker Rule, MetLife Inc. announced last year it would be exiting the banking business in order to focus on its insurance operations.

The National Association of Insurance Commissioners (NAIC) has also submitted a comment letter saying investments are “critical” to the insurance business model and the state-led regulatory scheme has done well in overseeing the types of investments insurers make.

Read the entire article on an insurance exception to the Volker Rule: SEC Considers Insurer Exception to Volker Rule (BestWire 3/9/12)