Banking and Finance Law Daily Fed extends comment period for its insurance company capital proposal
Monday, July 25, 2016

Fed extends comment period for its insurance company capital proposal

By John M. Pachkowski, J.D.

The Federal Reserve Board has extended until Sept. 16, 2016, the comment period for the advanced notice of proposed rulemaking (ANPR) detailing conceptual frameworks for capital standards. The standards could apply to systemically important insurance companies and to insurance companies that own a bank or thrift.

The ANPR, which was approved by the Fed at its June 3, 2016, meeting, and published in the June 14, 2016, Federal Register, seeks comments on the Building Block Approach and the Consolidated Approach that would be used to establish regulatory capital requirements for supervised insurance institutions. The two approaches were developed from input received and considered through engagement with insurance regulators, industry and accounting experts, and representatives from the insurance industry, among other interested parties. The two approaches also meet the requirements of section 171 of the Dodd-Frank Act, referred to as the Collins Amendments, especially 2014 amendments that provide the Fed with flexibility to tailor these capital requirements to the risks presented by insurance companies (see Banking and Finance Law DailyJune 3, 2016).

In its notice extending the comment period, the Fed said that given "the range and complexity of the issues addressed in the ANPR" an extended comment period "allow[s] interested persons additional time to analyze the proposal and prepare their comments."

The Fed’s action also was a response to a number of comment letters calling for the extension. For example, the U.S. Chamber of Commerce called for a 45-day extension. The Chamber of Commerce noted that an extension of the comment period "is warranted in light of the novel and unique legal questions raised in the ANPR, many of which are being considered by stakeholders for the first time." The business group further justified its request by noting that it and its members are also "actively responding" to a second proposal also approved by the Fed at its meeting. That second proposal would implement the requirements of section 165 of the Dodd-Frank Act that directs the Fed to establish enhanced prudential standards for nonbank financial institutions that the Financial Stability Oversight Council has designated to be systemically important insurance companies. If finalized, the enhanced prudential standards would apply to American International Group, Inc. (AIG), and Prudential Financial, Inc. (see Banking and Finance Law DailyJuly 21, 2016).

Companies: American International Group, Inc.; Prudential Financial, Inc.; U.S. Chamber of Commerce

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