Protecting Insurance Policyholders When Affiliated Bank Holding Companies Fail (H.R. 1478)

What is H.R. 1478?

(Updated July 21, 2017)

This bill clarifies that state insurance regulators are authorized to wall-off insurance companies that are affiliated with bank holding companies from being held financially responsible for an affiliated bank’s failure under financial stress and is required to support the holding company.

The FDIC would be authorized to place financially insolvent bank holding companies under the state’s jurisdiction if a state regulatory agency hasn’t stepped in, to ensure that state agencies can intervene to protect insurance policyholders.

Before placing a lien on a bank holding company’s assets, the FDIC would be required to inform the state insurance authority promptly of their intentions. If the state insurance regulators notify them that doing so would have a materially adverse effect on the insurance company’s policyholders.

Under current law, there is a possibility that state insurance regulators would be kept from participating in the orderly liquidation of a bank by the Federal Deposit Insurance Corporation (FDIC) to ensure that insurance policyholders are protected.

Argument in favor

People shouldn’t have to worry about losing value on their insurance policies when a bank holding company that includes their insurance provider becomes insolvent. State regulators can effectively protect policyholders in those situations.

Argument opposed

If an insurance company is affiliated with an insolvent bank holding company, that holding company needs to use whatever funds it can find to stabilize itself — even if it diminishes the value of people’s policies.

Impact

Insurance policyholders, bank holding companies that own insurance companies, state insurance regulators, and the FDIC.

Cost of H.R. 1478

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sponsoring Rep. Bill Posey (R-FL) introduced this legislation to protect insurance consumers to lose value on their insurance policies simply because the insurance company is affiliated with a failing bank:

“It’s simply wrong to force average middle-class families to put their homeowner’s or life insurance policies at risk because some Wall Street firm made a bad bet.”

This bill was necessitated by unclear provisions within the Dodd-Frank Act, and creates an additional pathway for the FDIC to step in and assist state insurance regulators.

The House Financial Services Committee unanimously passed this legislation by a vote of 57-0, and this bill has 35 cosponsors in the House — including four Democrats and 31 Republicans.

Media:

• Sponsoring Rep. Bill Posey (R-FL) Press Release
• Independent Agent
• National Association of Insurance Commissioners (In Favor)
• Property Casualty Insurers Association of America (In Favor)