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The House Financial Services Committee approved the Policyholder Protection Act (H.R. 1478), bipartisan and bicameral legislation introduced by Rep. Bill Posey (R-FL) and Rep. Brad Sherman (D-CA) to ensure that your personal insurance policies won’t be raided in order to prop-up failing financial institutions. The vote in committee was unanimous. 

“It’s wrong to force middle-class families to put their homeowners’ or life insurance policies at risk because some Wall Street firm made a bad bet,” said Rep. Bill Posey, a member of the House Financial Services Committee. “This bipartisan legislation safeguards important policies designed to protect insurance consumers and ensures that insurance claims would continue to be paid.” 

State insurance regulators have long held authority to protect insurance funds or assets from being used as a “source of strength” by an affiliated institution like a bank. But depending on how an insurance company is structured, there is less certainty that state regulators would have this protective tool at their disposal. The Policyholder Protection Act guarantees that these protections will be available regardless of how an insurance company is structured. 

Additionally, under current law, the Federal Deposit Insurance Corporation (FDIC) could take a lien on the assets of an insurance company that is part of a larger financial group without concern for how policyholders would be impacted. H.R. 1478 addresses this oversight and also requires the FDIC to notify state insurance regulators when they intend to take a lien on insurance company assets and to consult with the states on how this action could affect policyholders.