(a) Purpose. This subpart establishes a framework for assessing overall risk-based capital for Board-regulated institutions that are significantly engaged in insurance activities. The framework in this subpart is used to measure available capital resources and capital requirements across a Board-regulated institution and its subsidiaries that are subject to diverse capital frameworks, aggregate available capital resources and capital requirements and calculate a ratio that reflects the overall capital adequacy of the Board-regulated institution.

(b) Applicability. This subpart applies to every Board-regulated institution that is:

(1) A top-tier depository institution holding company that is an insurance underwriting company; or

(2) A top-tier depository institution holding company, that, as of June 30 of the previous calendar year, held 25 percent or more of its total consolidated assets in insurance underwriting companies (other than assets associated with insurance underwriting for credit risk). For purposes of this paragraph (b)(2), the Board-regulated institution must calculate its total consolidated assets in accordance with GAAP, or if the Board-regulated institution does not calculate its total consolidated assets under GAAP for any regulatory purpose (including compliance with applicable securities laws), the company may estimate its total consolidated assets, subject to review and adjustment by the Board; or

(3) Depository institution holding company in a supervised insurance organization; or

(4) An institution that is otherwise made subject to this subpart by the Board.

(c) Exclusion of certain depository institution holding companies. Notwithstanding paragraph (b) of this section, this subpart does not apply to a top-tier depository institution holding company that—

(1) Exclusively files financial statements in accordance with Statutory Accounting Principles (SAP);

(2) Is not subject to a state insurance capital requirement; and

(3) Has no subsidiary depository institution holding company that—

(i) Is subject to a capital requirement; or

(ii) Does not exclusively file financial statements in accordance with SAP.

(d) Reservation of authority—(1) Regulatory capital resources. (i) If the Board determines that a particular company capital element has characteristics or terms that diminish its ability to absorb losses, or otherwise present safety and soundness concerns, the Board may require the supervised insurance organization to exclude all or a portion of such element from building block available capital for a depository institution holding company in the supervised insurance organization.

(ii) Notwithstanding any provision of § 217.608, the Board may find that a capital resource may be included in the building block available capital of a depository institution holding company on a permanent or temporary basis consistent with the loss absorption capacity of the capital resource and in accordance with § 217.608(g).

(2) Required capital amounts. If the Board determines that the building block capital requirement for any depository institution holding company is not commensurate with the risks of the depository institution holding company, the Board may adjust the building block capital requirement and building block available capital for the supervised insurance organization.

(3) Structural requirements. In order to achieve the appropriate application of this subpart, the Board may require a supervised insurance organization to take any of the following actions with respect to the application of this subpart, if the Board determines that such action would better reflect the risk profile of an inventory company or the supervised insurance organization:

(i) Identify components under this subpart differently than as done by the supervised insurance organization. This could include a different identification of a top-tier depository institution holding company, an inventory company, a material financial entity, or a building block parent, then that made by the supervised insurance organization; or

(ii) Set a building block parent's allocation share of a downstream building block parent equal to 100 percent.

(4) Other reservation of authority. With respect to any treatment required under this subpart, the Board may require a different treatment, provided that such alternative treatment is commensurate with the supervised insurance organization's risk and consistent with safety and soundness.

(e) Notice and response procedures. In making any determinations under paragraph (d) of this section, the Board will apply notice and response procedures in the same manner as the notice and response procedures in § 263.202 of this chapter.