by Marion Leydier, Benjamin Weiner, and Rodrick Gilman Jr.
New Supervisory Framework Applies to Depository Institution Holding Companies Significantly Engaged in Insurance Activities
SUMMARY
The Board of Governors of the Federal Reserve System (“Board”) issued, on September 28, 2022, final guidance (“Final Guidance”) establishing a framework (“Framework”) for the supervision of depository institution holding companies significantly engaged in insurance activities, or “supervised insurance organizations” (“SIOs”).[1] A depository institution holding company is considered to be an SIO if (1) it is an insurance company, or (2) over 25% of its consolidated assets are held by insurance company subsidiaries, or (3) it has been otherwise designated as an SIO by the Board. The Framework provides a risk-based approach to establishing supervisory expectations and conducting supervisory activities; a supervisory rating system with three components for capital management, liquidity management, and governance and controls; and a description of how Board examiners will incorporate and rely on the work of state insurance regulators and other supervisors of SIOs in order to limit supervisory duplication. Board supervisory activities will focus on understanding risks that could threaten the safety and soundness of the SIO or its ability to act as a source of strength for its depository institutions. Each SIO will be classified by the Board as either complex or noncomplex, which will serve as the basis for determining the level of supervisory resources dedicated to the SIO and the frequency and intensity of the Board’s supervisory activities. Classification under the Framework will be based on the Board’s assessment of various factors relating to an SIO’s risk profile, with a firm automatically classified as complex if its depository institution’s average assets exceed $100 billion.
The Framework will become effective November 3, 2022.