FRB Adopts New Framework for Supervision of Insurance Activities

The Federal Reserve Board ("FRB") adopted a final framework for the supervision of a depository institution holding company that (i) is an insurance underwriting company or (ii) has over 25 percent of its consolidated assets held by insurance underwriting subsidiaries.

In the framework, the FRB described its approach to the supervision of insurance organizations, focusing on the risks that differentiate these organizations from traditional banking entities. The framework detailed the material risks that could pose a threat to the safety of the business's operations, with more complex businesses requiring greater supervision. The FRB explained the supervisory rating system, outlining specific requirements and expectations for each firm's insurance activities to help those firms address the areas most susceptible to greater risks. The FRB stated that insurance companies should evaluate and label those risks with four potential ratings ranging from "deficient" to "broadly meets expectations."

The FRB said that the final version of the framework remained largely unchanged from its proposal (see previous coverage).

In addition, the FRB highlighted that it plans to work with state- and lower-level insurance regulators to ensure adequate supervision of insurance activities.