Federal Reserve Proposes Regulatory Capital Frameworks for Supervised Insurers and Enhanced Prudential Standards for Insurers Designated as Systemically Important: FRB Issues Advance Notice of Proposed Rulemaking Describing Two Regulatory Capital Frameworks for FRB-Supervised Insurance Companies; Also Issues Proposed Rule Applying Enhanced Prudential Standards to FSOC-Designated Insurance CompaniesSullivan & Cromwell LLP - June 7, 2016
On June 3, 2016, the Board of Governors of the Federal Reserve System (“FRB”) unanimously approved an advance notice of proposed rulemaking (“ANPR”) describing two potential regulatory capital frameworks that would apply to insurers supervised by the FRB. The first capital framework is called the “building block approach” and would apply to savings and loan holding companies or bank holding companies with significant insurance activities. The second capital framework is called the “consolidated approach” and would apply to nonbank financial companies designated as systemically important by the Financial Stability Oversight Council that have significant insurance activities (“Insurer SIFIs”). On June 3, 2016, the FRB also unanimously approved a notice of proposed rulemaking (“NPR”) that would apply certain “enhanced prudential standards” to Insurer SIFIs, as required by Section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The proposed enhanced prudential standards include corporate governance, risk management and liquidity risk management requirements, including requirements to conduct liquidity stress testing and maintain a liquidity buffer. Comments on both the ANPR and the NPR are due on August 2, 2016.