|By Jeff Jeffrey|
|A.M. Best Company, Inc.|
Industry trade organizations argue that unless the exemption is granted, insurers could face severe financial pressures because many companies invest in hedge funds as a way to bolster their solvency and their ability to pay claims.
"Schapiro appeared to agree that insurers should be allowed to invest in hedge funds when she spoke to members of the subcommittee. But there was some question as to whether the
"The Dodd-Frank is very clear in saying that as long as an insurer is adhering to state investment laws, which were specifically designed to govern insurance companies, they will be able to continue making investments as they were before the law," said Olsen, who drafted PCI's comment letter.
"But in the meantime, while the
The Volcker Rule, named for former United States Federal Reserve Chairman
Last year, the
Driven in part by the application of the Volcker Rule,
Olsen said the problem may have come as a result of human error in the drafting process. In one section, the proposed rule specifically mentions hedge funds as a type of investment vehicle insurers can invest in, but another section does not.
If the exemption is not granted, Olsen said, "Insurers would lose a very valuable investment genre at a time when many are already seeing reduced yields as a result of low interest rates. They still have to make decent returns to maintain their solvency and their ability to pay claims."
"Investment laws and regulations provide limits on the type and extent of insurer investments, and examination of insurer investment portfolios to ensure compliance with such laws is part of the ongoing oversight by state insurance departments. As such, we do not think a review of such investment laws by the federal government would ever be necessary," the NAIC letter said.
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