The Securities and Exchange Commission is considering giving insurers a broad exemption from the Volcker Rule, that section of the Dodd-Frank Wall Street Reform and Consumer Protection Act which restricts financial institutions from engaging in certain kinds of speculative investing. The rule is scheduled to be implemented on July 21, 2012.
In answering a question at a House Appropriations Committee subcommittee hearing yesterday, SEC chairman Mary Schapiro said the agency is considering exempting insurer activity in covered funds as well as investments in their general account from the Volcker rule.
The hearing was held by the Financial Services and General Government Subcommittee of the House Appropriations Committee.
Rep. Jo-Ann Emerson (R-Mo.) heads the subcommittee.
Schapiro’s comment was made in response to a question from Rep. Rodney Alexander (R-La.).
Alexander explained that the current proposal implementing the Volcker Rule does not capture Congressional intent by exempting insurance companies’ ability to engage in proprietary trading from the ban on investments in private equity.
He said that, “Cutting off that ability to insurance companies would impact the ability of [my] constituents to guarantee for uncertainties of life.”
He added that, the goal of the Volcker rule would make retirement and long-term care insurance more costly by limiting insurers’ ability to invest in covered funds.
In response, Schapiro said that the Volcker Rule does not allow for investment in covered funds by insurance company general accounts.
“This is a really important issue and we are reviewing the comment letters and meeting with insurance companies," Schapiro said. “We are looking at whether there can be flexibility on this point."