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U.S. Representatives Bill Posey (R-FL) and Brad Sherman (D-CA) joined with U.S. Senators David Vitter (R-LA) and Jon Tester (D-MT) introduced the Policyholder Protection Act (H.R. 1478, S. 798), bipartisan legislation to ensure that your personal insurance policies won’t be raided to prop-up failing financial institutions.

“It’s simply wrong to force average middle-class families to put their homeowner’s or life insurance policies at risk because some Wall Street firm made a bad bet,” said U.S. Rep. Bill Posey, a member of the House Financial Services Committee.

“I strongly support this bipartisan, common-sense fix that needs to be made,” said U.S. Rep. Brad Sherman, also a member of the House Financial Services Committee. “It will insure that those with insurance policies will not have the security of those policies undermined by a contingency they could not foresee.”

“Returning discretion to insurance state regulators, rather than the federal government, will better protect consumers and taxpayers,” said U.S. Senator David Vitter, a member of the Senate Committee on Banking, Housing and Urban Affairs.

“Insurance is designed to protect customers against risk, and policyholders shouldn’t be on the hook for a failing bank that’s tied to their insurer,” said U.S. Senator Jon Tester, a member of the Senate Committee on Banking, Housing and Urban Affairs. “This bill empowers state insurance regulators to protect policyholders, regardless of their organizational structure.”

Specifically, the bill clarifies the intended authority of state insurance regulators to wall-off insurance companies organized under thrift holding companies from being held financially responsible for an affiliated bank’s failure or financial stress. Under current law, there exists an opportunity that the state regulator would be kept out of the process of an FDIC orderly liquidation to ensure the proper steps are taken to protect policy holders. This legislation would ensure that all the tools are available to state insurance regulators to protect policyholders from undue harm and continue to pay claims regardless of the financial condition of an affiliated institution.