A Federal Reserve Board ("FRB") proposal to establish capital requirements for certain supervised insurance companies was published in the Federal Register. Comments must be submitted by December 23, 2019.
As previously covered, the proposal would implement a framework, known as the "Building Block Approach," for risk-based capital requirements for depository institution holding companies that are significantly involved in the insurance industry. The FRB stated that the Building Block Approach is intended to (i) determine a company's enterprise-wide capital requirement and (ii) adjust and aggregate existing legal entity capital requirements.
The FRB proposal also includes:
- risk-based capital requirements for these holding companies that would exclude their insurance activities under Section 171 ("Leverage and Risk-Based Capital Requirements") of the Dodd-Frank Act; and
- a buffer that would limit insurance depository institution holding companies' capital distributions and discretionary bonus payments when there is insufficient capital relative to enterprise-wide risk and risk from insurance activities.
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