Fed Sets Annuity-Friendly Capital Rules for Insurers It Regulates

The regulation: Regulators using the new rule, which takes effect Jan. 1, will measure how strong a supervised insurance organization is by adding up the capital and capital needs for each of the organization’s “building block parent” subsidiaries.

The Building Block Approach ratio, or BBA ratio, will be the “ration of the aggregated available capital to the aggregated required capital.”

An affected organization must have a BBA ratio of 400%, including a minimum ratio of 150% and a 150% “capital conservation buffer.”

The board plans to publish supervised organizations’ BBA ratios.

The Fed board delegates authority to the staff to power the standards-setting process.

One governor, Michelle Bowman, issued a statement saying that she supports the substance of the rule but believes the way the board gave the authority to its staff was overly broad.

“Including appropriate parameters around the use of delegated authority is important to support the values of transparency, fairness and accountability,” Bowman said.

Reactions: Mariana Gomez-Vock, an ACLI vice president, said in a comment about the new final rule that the ACLI appreciates the time the Fed put into the capital standards effort.

“While we are still reviewing it, we are encouraged by the Fed’s intent to adopt a final rule that is appropriate for the U.S. market,” Gomez-Vock said. “This approach is important to ensuring U.S. consumers can continue to access long-term financial products they want and need for their financial and retirement security.”