This bill — the State Insurance Regulation Preservation Act (SIRPA) — would limit the Federal Reserve’s (aka the Fed) ability to oversee thrift holding companies that are state-regulated insurers. It would define a new group of financial services entities, “insurance savings and loan holding companies” (ISLHCs), which are currently subject to both state and Fed regulation under the Dodd-Frank Act, and make them subject only to day-to-day state regulations. State regulators and their umbrella organization, the National Association of Insurance Commissioners (NAIC), would be the primary ISLHC regulator. The Fed would remain able to take a more active role if ISLHCs fail to adhere to regulatory requirements.
ISHLCs would be defined as one of the following:
A top-tier savings and loan holding company that is an insurance company;
A savings and loan holding company that, during the four most recent consecutive quarters, held 75% or more of its consolidated assets in one or more insurers, other than asserts associated with insurance for credit risk; or
A top-tier savings and loan holding company that was registered as a savings and loan holding company before July 21, 2010 (the date Dodd-Frank was signed) and is a New York not-for-profit corporation formed for the purpose of holding the stock of a New York insurance company.
This bill would also amend the Home Owners’ Loan Act (HOLA), which currently requires savings and loan holding companies to promptly provide the Fed’s Board of Governors (BOG) with reports and other supervisory materials like audited financials, upon request. Under this bill, this requirement would be amended so that, in the case of an ISLHC, the BOG’s request for information must be channeled through the “applicable state or Federal regulatory authority.”
This bill would also reduce ISLHCs’ reporting requirements by reducing their required reporting related to:
Transactions between the ISLHC and its affiliates;
Balances sheet and income statements of a material subsidiary of the company; and
Capital holdings in relation to applicable minimum capital standards.
A “material subsidiary” would be defined as a subsidiary that meets one of the following criteria:
Off-balance sheet activities if not less than $5 billion;
Equity capital exceeding 5% of the consolidated equity capital of the top-tier holding company; or
Consolidated operating revenue exceeding 5% of the consolidated operating revenue of the top-tier holding company.
Functionally regulated subsidiaries, nonoperating shell holding companies, and companies primarily engaged in internal treasury, investment, or employee benefits activities wouldn’t be defined as “material subsidiaries.”
Examination and application of supervisory guidance by the BOG to ISLHCs or ISLHC subsidiaries would be prohibited as long as such companies meet applicable state insurance capital standards and any federal-level minimum capital standards for an ISLHC promulgated by the BOG.
BOG examinations of, and supervisory guidance applicable to, an ISLHC would be required to be based on a “supervisory framework” that is: 1) tailored to the risks and activities of the insurance business, and 2) developed in consultation with state insurance authorities to ensure that the framework is neither duplicative nor in conflict with state requirements. When issuing regulations, orders, or supervisory guidance applicable to an ISLHC, the BOG would be required to use the same supervisory framework. Additionally, ISLHCs are exempted from the requirement to maintain books and records as for the BOG.
Under certain circumstances when an institution’s “safety and soundness” are in question, the BOG would be permitted to suspend these new regulations. The BOG also retains the authority to impose capital requirements under the Collins Amendment.