Sen. Brown Opening Statement at Banking Committee's Hearing on Insurance Regulation
WASHINGTON, D.C. — U.S. Sen. Sherrod Brown (D-OH) – ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs – released the following opening statement, as prepared for delivery, at today’s hearing entitled “The State of the Insurance Industry and Insurance Regulation.”
Brown’s remarks, as prepared for delivery, follow.
Senator Sherrod Brown - Opening Statement
Hearing: “The State of the Insurance Industry and Insurance Regulation.”
April 28, 2015
Thank you, Mr. Chairman, and thank you to our witnesses for being here today.
Insurance is an area of great interest to me. In addition to the millions of insurance consumers in the state of Ohio, the city of Columbus is second in the nation behind Hartford in concentration of insurance jobs.
Insurance became an area of great interest to all of us in 2008, when the near-failure and bailout of the insurance company AIG was a central event in the financial crisis.
AIG realized 45 percent of the losses at all insurers in 2008, and received 55 percent of the government support provided to insurers.
Dodd-Frank contains a number of provisions to prevent another AIG from happening again, including:
Creating the Financial Stability Oversight Council, or FSOC, a single entity responsible for examining risks facing our entire financial system, identifying systemic financial firms, and encouraging the regulation of risky activities;
Regulating derivatives, including credit default swaps;
Eliminating the Office of Thrift Supervision and moving thrift regulation to the Federal Reserve;
Creating non-bank Systemically Important Financial Institution, or SIFI, designations; and
Requiring enhanced capital and leverage rules for non-bank SIFIs, including insurance companies.
But few laws are perfect.
Last year, Congress passed, and the President signed into law, legislation that Senator Collins, Senator Johanns, and I introduced to address a specific unintended consequence of section 171 of Dodd-Frank, known as the Collins Amendment.
The Insurance Capital Standards Clarification Act allows the Federal Reserve to tailor capital rules to the insurance business model.
I look forward to hearing about the Federal Reserve’s ongoing implementation of that legislation, and how it plans to design capital requirements for savings and loan holding companies and non-bank SIFIs.
I also look forward to hearing about international developments.
In order for our insurance companies, small and large, to succeed, all of the witnesses today need to be working together on international insurance issues.
Finally, I am interested in hearing about how state and federal regulators are identifying and addressing emerging risks in the insurance markets, including captive reinsurance, private equity ownership, and reaching for yield.
You all have seats on the FSOC, where identifying emerging risks is part of preventing the next financial crisis.
While I believe that traditional insurance is distinct business from banking, and should be treated as such, it is important to remember that institutions often combine regulated activities and so-called “shadow” banking.
Special purpose vehicles, or SPVs, that played a significant role in the financial crisis seem to be making their way back into the insurance market.
And we know that insurers can engage in a wide range of activities, from derivatives to securities lending.
As we move farther and farther away from 2008, we must not forget what happened and we should not take our eyes of potential sources of risk to policyholders and the financial system.
Each of our witnesses today plays an important role in the regulatory framework for insurance companies, and I look forward to each of your perspectives on domestic and international issues.
Thank you, Mr. Chairman.
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