In June, the Obama Administration published a white paper on financial regulatory reform that proposes a vast array of changes to US regulation of the financial industry. Key elements of the white paper that would affect the insurance industry are set out below:
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The Obama Administration has proposed that the US Federal Reserve be given supervisory authority over any financial firm, including those operating primarily in the insurance industry, whose size, leverage and interconnectedness to the global financial system is such that its failure could pose a threat to financial stability (“Tier 1 FHCs”) - these firms would then be subject to heightened capital, liquidity and risk management standards.
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The white paper calls on the US Congress to establish an Office of National Insurance within the US Department of the Treasury that would become the primary federal body responsible for the insurance industry and be initially tasked with gathering information, evaluating existing regulations and identifying insurance companies that should be regulated as Tier 1 FHCs. The Office of National Insurance would also represent the United States in the International Association of Insurance Supervisors and have authority to enter into international agreements with respect to insurance regulation.
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The Obama Administration has directed the US Department of the Treasury to propose means of modernising and improving the US insurance regulatory system with a view to, among other things, increasing national regulatory uniformity (currently US regulation of the insurance industry is largely determined at the state level).
Overall, the Obama Administration’s white paper is largely conceptual, leaving details to be worked out through the regulatory and legislative processes. The more significant proposals will need approval from the US Congress. It remains to be seen whether the final product of these processes will fully reflect the objectives articulated in the Obama Administration’s white paper.
The Obama Administration’s full white paper is available at: http://www.financialstability.gov/docs/regs/FinalReport_web.pdf.
For our full briefing on the Obama Administration’s proposals, please follow the link below: http://www.linklaters.com//pdfs/publications/Regulation/Obama_Proposal.pdf.
For further information, please contact: Stan Renas (stan.renas@linklaters.com, (1) 212 903 9335).
