Earlier this week, the U.S House of Representatives Financial Services Committee reported H.R. 1478, the “Policyholder Protection Act,” by Reps. Bill Posey (R-Florida) and Brad Sherman (D-California) to the full House by a vote of 57-0. Several other financial regulation bills were also considered during the markup. The Big “I” lobbied in support of H.R. 1478 during the Legislative Conference in April and signed a letter in support of this bill earlier this year.
To achieve its primary goal, the Policyholder Protection Act clarifies that Dodd-Frank allows state regulators to wall off and protect insurance company assets designated for policyholder claims when an insurance company is part of a larger diversified financial institution. The legislation prevents federal banking regulators from using insurance assets as a “source of strength” and transferring the assets of state-regulated insurance companies and their subsidiaries to an affiliated bank if state insurance commissioners deem such a transfer harmful to policyholders.
The legislation also clears up several ambiguities contained within Dodd-Frank. Namely, the bill would limit the Federal Deposit Insurance Corporation’s (FDIC) ability to place liens on the assets of an insurer or subsidiary of an insurer without the approval of state insurance regulators. This is another way to prevent federal bank regulators from putting state-regulated insurers and their consumers at risk to prop up a failing bank.
Finally, while Dodd-Frank does give the FDIC “back up” resolution authority if a state regulator fails to initiate liquidation proceedings on a failing insurer when the FDIC requests it, this bill allows for another potential approach for dealing with the failing company. H.R. 1478 says state insurance regulators have the ability to use rehabilitation as a resolution tool and that a state’s decision to rehabilitate rather than liquidate will not trigger FDIC backup authority. This ensures that state regulators, not bank regulators, will continue to resolve troubled insurers, except in the unlikely circumstance that the state fails to act.
The Big “I” urges the full House to consider this bill, which also has a companion in the Senate, S. 798 by Sens. David Vitter (R-Louisiana) and Jon Tester (D-Montana). The association has always supported state regulation of insurance and this common-sense legislation further reinforces the strong insurance consumer protections the state oversight model contains.
Jen McPhillips is Big “I” senior director of federal government affairs.
