FED Extends Consultation Period for Capital Requirements for Insurers

Under the proposed framework, known as the Building Block Approach or BBA, holding companies significantly engaged in insurance activities would be required to aggregate their state-based capital requirements into a consolidated requirement. The Building Block Approach accounts for risks that are specific to the business of insurance and is different from the calculations used for bank capital requirements. However, the minimum standard under the Building Block Approach would be comparable to one of the key measures of bank health, the minimum total capital ratio, which is set at 8% for banks. The proposal would establish both minimum requirements and a buffer on top of the minimum. The proposal would also revise reporting requirements for depository institution holding companies significantly engaged in insurance activities. 

FED proposes to implement a new reporting form for use in the Building Block Approach. The proposed reporting form, titled “Capital Requirements for Board Regulated Institutions Significantly Engaged in Insurance Activities” (Form FR Q-1), and instructions focus on information needed to perform the Building Block Approach calculations. The proposed Form FR Q-1 is not intended to be exhaustive in terms of addressing supervisory needs other than the needs for the Building Block Approach. The vast majority of the information reported to FED through the proposed reporting form would not be public. The information that FED proposes to make public would consist of the building block available capital, building block capital requirement, and Building Block Approach ratio for the top-tier parent of an insurance depository institution holding company’s enterprise. The proposed effective date for the reporting form is January 2021.

Related Links

• Federal Register Notice
• Proposed Rule
• Press Release, October 2019

Comment Due Date: January 22, 2020

Keywords: Americas, US, Banking, Insurance, Building Block Approach, FR Q-1, Capital Requirements, Reporting, FED