For the past few years, since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, there has been a lot of uncertainty about the ways in which insurance companies had to conform to capital standards. Now, however, a new bill that just passed the U.S. Senate will likely clear that up.
The Senate recently passed S. 2270, which was known as the "Insurance Capital Standards Clarification Act of 2014," according to a report from Life Health Pro. This law would revise Section 171 of the Dodd-Frank Act to state definitively that insurance-based capital standards should apply to any insurance company overseen by the Federal Reserve Board. While this sounds as though it should be simple common sense, the Fed originally interpreted the Wall Street reform law to mean that bank capital rules should apply to insurers as well.
The bill went through so quickly, in fact, that it needed only the so-called "hotlining" procedure reserved only for bills that have no opposition and can therefore be fast-tracked, the report said. The process of getting S. 2270 passed took only a few hours.
Similar speed for companion legislation expected
Meanwhile, the U.S. House of Representatives is now considering a bill that goes with S. 2270 that would make the legislation law, and that likewise could be done in short order, the report said. That bill, H.R. 4510, has broad bipartisan support and 53 co-sponsors in all and should face little to no resistance. The American Council of Life Insurers praised the decision to move the bills through the legislature as quickly as possible, stating it was glad to see so much agreement that the capital standards of banks should never have been applied to life insurers in particular. It further commended lawmakers on both sides of the aisle, regulators at both the state and federal levels, and the Obama administration for getting these issues cleared up with as little fuss and delay as possible.
After years of lagging behind where they likely want to be, individual life insurers may see this as very good news, because it might give them far more flexibility to pursue broader portfolios than they might have been able to under the old rules, which were typically seen as being too unclear to really drive success in the industry going forward.