Chairman Sherrod Brown
Senate Committee on Banking, Housing and Urban Affairs
Subcommittee on Financial Institutions and Consumer Protection
534 Dirksen Senate Office Building
Washington, DC 20510
Re: Subcommittee Hearing: “Finding the Right Capital Regulation for Insurers”
Dear Chairman Brown and Members of the Subcommittee:
Thank you for the opportunity to present my views on the appropriate capital framework for insurance companies under the Dodd-Frank Act. I understand the insurance industry has expressed concerns about the potential treatment of insurance companies by the Federal Reserve in its establishment of consolidated capital standards for bank holding companies and nonbank financial institutions designated for heightened supervision. I agree that the Federal Reserve can and should craft a capital framework appropriate to insurance products, and should have the discretion to defer to state insurance regulators in establishing capital standards for the insurance activities which they regulate. However, I also believe that the Federal Reserve already has ample authority to do so without undermining important safeguards.
I am concerned however, that S. 1369 may unintentionally go beyond legitimate concerns about protecting the integrity of state regulation of insurance. As drafted, S. 1369 would provide a wholesale carve-out from common sense protections contained in the Section 171 of Dodd-Frank, also known as the Collins’ amendment, for insurance conglomerates, including their banking and derivatives activities. This would give insurance giants a significant competitive advantage over banking organizations engaged in the same activities, and leave the door open to the kinds of highly leveraged risk-taking which contributed to the 2008 crisis. We should not forget that in 2008 AIG was also an insurance company, which took excessive risks in its non-state regulated affiliates.
Read the full letter below: