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COMMENTARY: Insurance capital rules bill is common sense


Common sense is a commodity that's always in short supply. That is particularly true in Washington, where a chance to do something attention-getting trumps a chance to do something truly worthwhile is happening with depressing frequency.

Anyone who has the stomach to watch C-Span's live coverage of Congress for more than a couple minutes is almost guaranteed to witness an example of this.

Fortunately, there are occasional exceptions to this sorry state of affairs.

Take the recent introduction of the Insurance Capital Standards Clarification Act of 2014. The bill is simple yet addresses a potentially significant problem — the possibility that insurers will be subject to federal regulations tailored for banks rather than underwriters.

Insurers have been concerned about having to meet requirements designed for banks ever since the financial crisis of 2008 erupted, bringing calls for greater federal regulation of all sorts of financial institutions in its wake. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, insurers deemed to be present systemic risks to the financial system as a whole could be subject to heightened regulation by the Federal Reserve.

The Fed, however, was not established to act as an insurance regulator. No one, including Fed officials, has taken to the streets demanding that the Fed take over insurance regulation, even for a limited number of companies.

To their credit, lawmakers repeatedly said they did not think that bank-centric regulations should be imposed on insurers. But the law left open the possibility insurers would have to meet standards that really didn't address their business. That's particularly true of property/casualty insurers, which have little in common with banks.

The business of insurance simply isn't the business of banking, and vice versa.

The bipartisan clarification bill says that the Fed would be required to accept statutory accounting principles as favored by insurers rather than requiring insurers to convert to generally accepted accounting principles when insurers prepare financial statements required of nonbank financial institution. This is what insurers, which already are subject to state regulation, want made clear.

It's simply common sense to treat insurers differently than banks. The catch will be getting even a common-sense bill enacted while the congressional calendar continues to shrink as the November elections — and an awful lot of recesses — loom.

Moving quickly to pass the clarification legislation won't be flashy or attention-grabbing, which probably befits a bill that deals with both insurance and accounting standards.

But doing so would be an exercise in common sense. Given how rarely that seems to come along on Capitol Hill these days, lawmakers ought to grab that opportunity as quickly as they can.