An effort to revise the Dodd-Frank Act gained bipartisan support in the Senate, but it faces a tougher road to passage in the House.On March 14, the Senate approved a package of reforms to the Dodd-Frank Act by a 67 to 31 vote. Backed by Senate Banking Committee Chairman Mike Crapo (R-ID), the bill lessens restrictions on smaller lenders and raises the dollar amount of assets a financial company must hold to be considered a Systemically Important Financial Institution (SIFI, or “too big to fail”) from $50 billion to $250 billion.
The Senate bill gained bipartisan support from moderate Democrats, although some progressive Democrats criticized it. President Trump has stated that he would sign the Senate bill into law. Before that can happen, however, the bill must pass the House of Representatives, where it faces a tougher test.
That’s because House Republicans, led by House Financial Services Committee Chairman Jeb Hensarling (R-TX), seek to rescind some additional aspects of the Dodd-Frank Act. Moderate Democratic senators have said they may not support the House’s legislation if it strays too far from the Senate version. Consequently, the road to major regulatory changes to Dodd-Frank remains far from certain at this point, yet some proposals, if ultimately enacted, could impact insurers and agents.
Insurers Break from SIFI Label
The lowered threshold for a SIFI designation may free some large financial institutions, including insurers, from the stricter supervision mandated by the Financial Stability Oversight Council (FSOC) established under Dodd-Frank. When the act was first implemented in 2010, American International Group, Inc. (AIG), Prudential, and MetLife, Inc. were tagged with that label. MetLife and Prudential later contested the classification in 2013.
AIG did not, but more recently, the federal government released it from the SIFI designation after it paid back the government’s $182 billion bailout loan. Both Prudential and MetLife appear similarly close to throwing off the “too big to fail” stamp, as well.
After a protracted legal battle, the FSOC decided earlier this year to not challenge a court decision that ruled in MetLife’s favor in the insurer’s battle to lift its SIFI classification. Likewise, Prudential may soon disengage from Dodd-Frank oversight after the FSOC said in February that it would meet to reconsider the company’s SIFI designation.
Chances are high that the insurer will get its wish in light of the Trump’s administration’s inclination for loosening regulations. The administration further voiced this preference in February, when Treasury Secretary Steve Mnuchin told the House Financial Services Committee that his agency would work with the panel to revise SIFI guidelines. Combined with these policy changes and the lowering of the SIFI threshold, other major insurers might escape SIFI designations in the future.
Implications for Agents, State Regulators
The Senate bill contains two provisions that have particular implications for agents, producers, insurers, and state regulators. One proposal stipulates that U.S. officials must inform state regulators and industry groups of any proposals under consideration when negotiating international insurance trade agreements. To foster further transparency, the Treasury Department and the Federal Reserve Board would produce a report on the global insurance regulatory regime annually.
For agents, the most significant proposal gives producers who work for agencies or insurers federal protection against legal action if they report possible elder financial fraud to authorities. To help agents spot such abuse, the Senate bill encourages insurers to offer training to help agents identify the signs that an elder has been the victim of financial fraud.