By Ryan Tracy and Leslie Scism 

WASHINGTON -- The Federal Reserve took a step toward imposing tougher capital requirements on insurers tagged for heightened oversight, sketching out proposals that companies can now respond to after years of uncertainty about the process.

The Fed's proposals, however, leave key details to be determined later, such as specific numerical capital requirements for large insurers Prudential Financial Inc. and American International Group Inc. U.S. regulators have tagged those two companies "systemic," and as such they face tougher rules than other insurers.

The proposals are set for a vote by the central bank's governing board later Friday, after which the industry would have a chance to comment on them.

One proposal, outlining capital rules for insurance firms under the Fed's purview, suggests a tougher set of rules for Prudential and AIG than for 12 insurance companies that own banks, including State Farm Mutual Automobile Insurance Co. and Nationwide Mutual Insurance Co. The Fed is asking for public comment on the capital concept, after which it would publish a draft rule.

Separately, the Fed is also set to propose draft risk-management and liquidity rules for Prudential and AIG, including requiring that they maintain enough safe assets to cover cash flows for 90 days and that they run "stress tests" ensuring they can meet their cash flow needs.

Those standards would likely take effect before the capital rules, but the Fed expects that the firms will be able to meet the new liquidity rules relatively easily, a Fed official told reporters on a conference call, calling them existing best practices for many firms.

Write to Ryan Tracy at ryan.tracy@wsj.com and Leslie Scism at leslie.scism@wsj.com

 

(END) Dow Jones Newswires

June 03, 2016 14:58 ET (18:58 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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