Fed approves rule founding capital needs for insurers

(MENAFN) On Friday, the US Federal Reserve declared that a rule establishing capital requirements for insurers under its board's supervision had been approved.

"The final rule includes a framework, known as the Building Block Approach, that builds on existing state-based insurance requirements, accounts for risks that are specific to the business of insurance, and is different from the calculations used for bank capital requirements," it stated in a declaration.

The final rule, which closely mirrors the proposal presented in September 2019, is scheduled to be implemented on January 1.

Its overarching goal is to define and institute the minimum risk-based capital requirements specifically tailored for depository institution holding companies that maintain substantial involvement in insurance activities.

As detailed in the Federal Reserve's statement from September 2019, holding companies deeply entrenched in insurance operations will be subject to the Building Block Approach. Under this approach, these companies will be mandated to systematically combine and consolidate their respective state-based capital requirements into a unified, cohesive requirement.

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