May 12, 2014
CAPITAL REQUIREMENTS FOR INSURERS UNDER COLLINS AMENDMENT
-- THE SAGA CONTINUES
As discussed in a previous Kramer Levin client alert,1 Federal legislators and regulators have been
seeking to clarify ambiguities in the Dodd-Frank Wall Street Reform and Consumer Protection Act2
regarding the capital requirements that apply to certain insurance companies.
On April 29, 2014, Senators Susan Collins (R-Me.), Sherrod Brown (D-Oh.) and Mike Johanns (R-Neb.)
introduced the bipartisan Insurance Capital Standards Clarification Act of 2014 (S. 2270), which would
allow Federal banking regulators to relieve certain insurers from more onerous bank-style capital
requirements.3 An identical House bill (H.R. 4510) was introduced the same day by Representatives
Gary G. Miller (R-Calif.) and Carolyn McCarthy (D-NY).4 Both bills are substantively similar to S. 2102,
a bill introduced by Senator Collins in March 20145 and discussed in the earlier client alert,6 albeit with
a few distinctions as discussed below.
By way of background, Dodd-Frank authorizes the Federal government to designate certain non-bank
financial firms (including insurers) as so-called “systemically important financial institutions,” or “SIFIs.”
SIFIs are subject to heightened financial regulation by the Board of Governors of the Federal Reserve.
Section 171 of Dodd-Frank (codified at 12 U.S.C. 5371), known as the Collins Amendment after its
drafter Senator Collins, specified further that SIFIs as well as holding companies of depository
institutions (including insurers and their affiliates) must be subject to capital standards that are “not less
than” those applicable to the depository institutions themselves. Under one reading of Section 171,
such holding companies and SIFIs would be required, in effect, to hold capital as though they were
banks. Although other provisions of Dodd-Frank (most notably Section 165) allow the Fed to distinguish
between insurers and banks more generally, Section 171 introduced the possibility of insurers being
subjected to inappropriate capital standards.
1
See “Senate Bill Would Enhance Fed’s Ability To Tailor Capital Requirements For Insurers”, March 13, 2014,
available at http://www.kramerlevin.com/Insurance-Practice-Group-Alert-Senate-Bill-Would-Enhance-Feds-Abilityto-Tailor-Capital-Requirements-for-Insurers-03-13-2014.
2
P.L. 111-203.
3
S.2270.
4
H.R. 4510.
5
S. 2102.
6
See “Senate Bill Would Enhance Fed’s Ability To Tailor Capital Requirements For Insurers”, available at
http://www.kramerlevin.com/Insurance-Practice-Group-Alert-Senate-Bill-Would-Enhance-Feds-Ability-to-TailorCapital-Requirements-for-Insurers-03-13-2014.
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Like S. 2102 before them, the two recently introduced bills would amend Section 171 by providing that,
in establishing capital standards for depository institution holding companies and SIFIs, bank regulators
“shall not be required to include” an insurer subject to insurance regulation.7 Insurers may specifically
be excluded even for purposes of determining consolidation in the first place.
H.R. 4510 and S. 2270 differ from the earlier bill mainly in their new provisions concerning accounting
requirements and a clarification on foreign insurers. Specifically, under the new bills, a depositary
institutions holding company or SIFI that is regulated by a state insurance regulator and files its holding
company financial statements using only state-based statutory accounting principles is not required to
prepare such financial statements in accordance with Generally Accepted Accounting Principles.
Moreover, the new bills clarify that in the case of a regulated foreign affiliate of an insurer, activities
falling outside foreign capital requirements would be regarded as outside the insurer’s “capacity as a
regulated insurance entity.”
***
Kramer Levin's Insurance Practice Group routinely advises clients on all aspects of insurance
regulation affecting transactions, reinsurance, solvency, investments, enterprise risk and other areas of
insurance company activity. We monitor regulatory developments at the state, federal and international
levels and offer clients in the insurance and reinsurance businesses the fullest range of transactional
and regulatory legal services. For more information on the matters discussed herein, please contact:
Daniel A. Rabinowitz
Co-Chair, Insurance Practice Group
drabinowitz@kramerlevin.com
212.715.9378
Alexander Traum
Law Clerk
atraum@kramerlevin.com
212.715.9360
***
This memorandum provides general information on legal issues and developments of interest to our
clients and friends. It is not intended to provide legal advice. Readers should seek specific legal advice
before taking any action with respect to the matters we discuss here. Should you have any questions or
wish to discuss any of the issues raised in this memorandum, please call your Kramer Levin contact.
7
H.R. 4510 § 1; S.2270 § 1; S. 2102 § 1.
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