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Last night the House of Representatives passed the Policyholder Protection Act (H.R. 1478), bipartisan 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 House Financial Services Committee voted unanimously to approve the legislation on November 4th.

“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. “I want to thank Representative Brad Sherman for his work on this bipartisan legislation that will safeguard important policies designed to protect insurance consumers and ensure that insurance claims will continue to be paid.”

“The bipartisan support for this bill proves that there is still room for common sense legislation that protects consumers,” said Rep. Sherman. “The assets of an insurance company should be walled off from the risky practices of their affiliated financial institutions. The assets of an insurance company are needed to pay claims of their policyholders, and those dollars should not be jeopardized by complex bets, risk taking, or poor management elsewhere within a large financial firm. I want to thank Congressman Posey for his great work and leadership on this bill.”

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. A Senate companion bill has been introduced by U.S. Senators David Vitter (R-LA) and Jon Tester (D-MT).