The Federal Reserve Board on Friday finalized a rule establishing capital requirements for insurers supervised by the Board. The final rule is substantially similar to the proposal issued in September 2019.
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. Under the Building Block Approach, a Board-supervised insurer is required to aggregate its top-tier company’s capital requirements with its subsidiaries’ requirements to determine its enterprise-wide requirement.
All Board-supervised insurers currently hold enough capital to comply with this rule, which takes effect as of January 1, 2024.