On Friday, the Federal Reserve Board finalized a regulation that sets capital requirements for insurers that are supervised by the Board. This final rule closely resembles the proposal that was released in September 2019.
The final rule incorporates a framework called the Building Block Approach, which takes into consideration the unique risks associated with the insurance industry and differs from the calculations used for bank capital requirements. This approach requires a Board-supervised insurer to combine its top-tier company’s capital requirements with those of its subsidiaries to determine its overall requirement.
All insurers under the supervision of the Board currently possess sufficient capital to meet the standards outlined in this rule. The rule will become effective from January 1, 2024.
Read the original Federal Reserve release here.