The bill clarifies Sec. 171 of the Dodd-Frank Act, which Collins also sponsored. A statement by Miller and McCarthy says that their legislation revises Sec. 171, which "requires" the Federal Reserve to apply bank capital rules to insurance companies it supervises. S. 2270 and H.R. 4510 "clarifies" that the Fed can apply insurance-based capital standards to the insurance portion of the business, while still keeping banking capital standards for the banking portion of the business.

It also prevents the Fed from requiring mutual insurance companies, such as State Farm, from preparing financial statements in accordance with generally accepted accounting principles, when they are already preparing financial statements in accordance with state-based statutory accounting principles.

Collins, other senators and insurance industry officials in recent Senate testimony have challenged whether the language "requires" the Fed to use bank-centric methods in evaluating insurance financial statements as part of its mandates to oversee systemically important insurers as well as be the consolidated regulators of insurance companies which operate savings and loans. The Fed won that authority through provisions of the DFA.

The Miller/McCarthy statement supports Sec. 171 as interpreted by Fed general counsel Scott Alvarez. "There is no question that robust capital standards for all of our nation's financial institutions are essential to protecting our economy," Miller said. He added that, "However, if not properly applied, these standards can be detrimental to the economy. Capital standards need to be calibrated appropriately so that they can preserve the safety and soundness of various types of financial institutions. I look forward to working with my colleagues to ensure this legislation becomes law."

"The Insurance Capital Standards Clarifications Act will help keep insurance products affordable by applying the correct capital standards to insurance companies that fall under the supervision of the Federal Reserve," McCarthy said.

"This legislation will give the Federal Reserve more flexibility and help clarify the difference between the business of insurance and the business of banking," she added. "I am pleased to support this common sense legislation which will play an important role in preventing future financial crises."  

"PCI has long been advocating against the one-size-fits-all model for regulation and we are pleased that there is broad, bipartisan agreement to clarify that any capital standards for insurance holding companies with depository institution affiliates are appropriately tailored to insurance," said Nat Wienecke, PCI's senior vice president, federal government relations.

Jimi Grande, NAMIC senior vice president of federal and political affairs, added that, "With the introduction of this legislation, Congress is making it clear that one size does not fit all when it comes to financial services regulation.

"Banking and insurance are two very different industries, and trying to regulate one under the same rules as the other would only lead to chaos for companies and increased costs for consumers," Grande said.

Leigh Ann Pusey, AIA president and CEO, said the bill clarifies the Federal Reserve Board's ability to tailor appropriate insurance-based capital standards for the insurance companies under its supervision.

"Prudential standards for holding companies and nonbank financial companies should be applied to companies engaged in the business of insurance in a manner consistent with the Dodd-Frank Act's intent," Pusey said.