In a letter recently submitted to the secretary of the Federal Reserve’s board of governors, the Financial Services Roundtable (FSR) expressed support for the Federal Reserve’s proposed use of state-level standards as the basis for a consolidated capital requirement for insurance companies.
The framework, which the Federal Reserve called the “building block approach,” (BBA) will require insurance companies under their supervision, as well as companies that include a bank or thrift as a part of their corporate structure to meet consolidated capital requirements that are based on state-level standards that have already been vetted by state insurance commissioners.
“We commend the Federal Reserve for suggesting a simple and efficient method for calculating an important regulatory threshold,” Rich Foster, FSR’s senior vice president for regulatory affairs said. “We appreciate that the Federal Reserve has been responsive to the specialized needs of the insurance industry. We look forward to continuing to work with the Fed as it develops and adopts a final capital standard.”
The BBA will also guarantee that the capital standard used by the Federal Reserve’s is specifically tailored to the business of insurance and will adequately protect policyholders. The FSR noted in its comments that the BBA would comply with the standards laid out in the Insurance Capital Standards Clarification Act (ICSCA).