Assemblyman Ned Thomson’s bill that will bring state law into alignment with federal law providing protections to New Jersey based insurance companies was signed into law Monday.
“This change is ultimately most important to policyholders,” Thomson (R-Monmouth) explained. “It will protect policyholders—you and me—in the case of dissolution.”
The U.S. Congress chartered the Federal Home Loan Bank system in 1932. Eleven regional banks comprise that system, second only to the Fed as the largest home loan lenders in the world, providing liquidity to nearly 7,000 corporate member banks, credit unions, insurance companies and community development financial institutions. Since 2008, charter members have been regulated by the Federal Housing Finance Agency. Ten percent of members’ profits go toward grants for affordable housing.
New Jersey law had excluded insurance companies from FHLB asset protections offered to banks and credit unions.
“Insurance companies have the same asset liability challenges as banks and credit unions but don’t have the same protections,” Thomson added. “Those companies will now be better able to weather economic storms and stay capitalized.”
Differences in state and federal law made FHLBs require burdensome collateral terms from New Jersey based insurance companies. Thomson’s law (A1746) will now allow federal home loan bank members to offer insurance companies collateral similar to other corporate members.
Twenty-three states have adopted similar measures, based on the National Council of Insurance Legislators model law consistent with the McCarran Ferguson Act of 1945, which grants states the authority and responsibility to regulate the insurance business.
New Jersey’s corporate insurance include Prudential, Horizon, NJM and Cumberland.
The law takes effect in February.