Bill to reduce reg overlap for insurance S&L holding companies awaits House

The Federal Reserve Board’s oversight of insurance savings and loan holding companies (ISLHCs) would be limited to avoid overlap with that of other regulators if a bill approved Tuesday by the House Financial Services Committee eventually becomes law.

The State Insurance Regulation Preservation Act (H.R. 5059) was marked up and approved July 24 by the House Financial Services Committee.

The committee says that, if enacted, the State Insurance Regulation Preservation Act of 2018 (H.R. 5059) would revise the Home Owners’ Loan Act to create a definition for ISLHCs; establish a regulatory framework that tailors an examination regime for them; and limit the Fed’s oversight of ISLHCs so as not to duplicate the examinations of other federal or state authorities.

The Fed supervises 414 savings and loan holding companies (SLHCs), according to the Fed’s 2017 annual report, and 11 of those are ISLHCs (such as USAA) – that is, primarily engaged in insurance underwriting activities. The report shows these 11 ISLHCs had a combined $1.04 trillion in total assets and $151 billion in thrift assets.

The Fed acquired authority over SLHCs under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which called for the closure of the former Office of Thrift Supervision (OTS) and redistributed OTS’ responsibilities to the other federal banking regulators.

The Fed evaluates ISLHCs’ risk-management practices, the financial condition of the overall organization and the impact of the nonbank activities on the depository institution, the 2017 report notes. “The Federal Reserve relies to the fullest extent possible on the work of state insurance regulators as part of the overall supervisory assessment of ISLHCs,” it says. “The Federal Reserve has been active in engaging with the state departments of insurance and the National Association of Insurance Commissioners (NAIC) on general insurance supervision matters.”

Introduced this February by Rep. Keith Rothfus (R-Pa.), H.R. 5059 drew bipartisan support during Tuesday’s mark-up (of seven bills in all) and was approved by voice vote. It awaits House action.

House Financial Services Committee July 24 mark-up

Federal Reserve 2017 Annual Report – Supervision and Regulation