Legislation Introduced to Clarify Capital Standards

This story appeared in Bank Digest.

The Insurance Capital and Accounting Standards Act of 2013 has been introduced to help ensure the affordability and availability of insurance products for consumers by providing clarity with regard to the capital standards applicable to insurance companies. The bill responds to capital requirements proposed in 2012. The proposal, jointly issued by the Office of the Comptroller of the Currency, Federal Reserve Board, and Federal Deposit Insurance Corp., is intended to help ensure banks maintain strong capital positions, enabling them to continue lending to creditworthy households and businesses even after unforeseen losses and during severe economic downturns.

According to Rep. Gary Miller (R-Calif.), the proposal "would require insurance companies to meet the same capital standards as banks, without regard to the distinctly different risk profile and business model of insurance companies." He believes the proposal could actually harm the solvency of an insurance company. He says his legislation would ensure that the capital standards for insurance companies are aligned with their asset and risk profile. According to Miller, "There is no question that robust capital standards for all of our nation's financial institutions are essential to protecting our economy. However, these standards can be detrimental to the economy if not properly applied. Capital standards need to be calibrated appropriately so that they can preserve safety and soundness."