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FRB Proposes Capital Requirements for Certain Supervised Insurance Companies

The Federal Reserve Board ("FRB") requested comment on a proposal to establish capital requirements for certain supervised insurance companies.

According to the FRB, the proposal would implement a framework for risk-based capital requirements, known as the "Building Block Approach," for depository institution holding companies that are significantly involved in the insurance industry. The FRB stated that the Building Block Approach is intended to (i) determine a company's enterprise-wide capital requirement and (ii) adjust and aggregate existing legal entity capital requirements. The FRB proposal also includes risk-based capital requirements for these holding companies that would exclude their insurance activities under Section 171 ("Leverage and Risk-based Capital Requirements") of the Dodd-Frank Act.

In addition, the FRB proposed a buffer that would limit insurance depository institution holding companies' capital distributions and discretionary bonus payments when there is insufficient capital relative to enterprise-wide risk and risk from insurance activities.

Comments must be submitted within 60 days of publication of the proposal in the Federal Register.

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