Life Insurers Praise Passage of Industry-Friendly Version of Volcker Rule
December 12, 2013 by Jeff Jeffrey
WASHINGTON – Five federal agencies voted Dec. 10 to approve the Volcker rule, which sets limits on financial institution investments. The life insurance industry has come out in support of the version of the Volcker rule adopted because it largely leaves investments made by insurers untouched.
The rule, a key component of the Dodd-Frank financial reform act, sets limits on bank investments in stocks, bonds, currency, commodities and derivatives. The rule is designed to keep banks from making investments that put federally insured deposits at risk (Best’s News Service, Dec. 9, 2013).
In separate votes, the Federal Reserve, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation and the Comptroller of the Currency all signed off on the rule.
The insurance industry, particularly in the life sector, had called for more clarity on how the rule would affect their investments. Some worried that life insurance companies would be caught up in the rule, given that early drafts appeared to target the industry’s investments in hedge funds and other securities (Best’s News Service, Oct. 29, 2013).
However, the American Council of Life Insurers said in a statement the final rule “reflects a recognition that the investment activities of life insurance companies are central to the overall insurance business model.”
The rule will continue to “ensure that all life insurers can continue to make investments and investment decisions permitted by and in accordance with state insurance investment laws,” ACLI said.
The rule’s passage fulfills an order issued by Treasury Secretary Jacob “Jack” Lew in July. He called for a final rule to be implemented by the end of the year.
(By Jeff Jeffrey, Washington Bureau manager: jeff.jeffrey@ambest.com)