Voya 2013 Annual Report Download - page 60

Securities Regulation Affecting Insurance Operations
Certain of our insurance subsidiaries sell variable life insurance and variable annuities that are registered
with and regulated by the SEC as securities under the Securities Act of 1933, as amended (the “Securities Act”).
These products are issued through separate accounts that are registered as investment companies under the
Investment Company Act, and are regulated by state law. Each separate account is generally divided into
sub-accounts, each of which invests in an underlying mutual fund which is itself a registered investment
company under the Investment Company Act of 1940 (the “Investment Company Act”). Our mutual funds, and
in certain states, our variable life insurance and variable annuity products, are subject to filing and other
requirements under state securities laws. Federal and state securities laws and regulations are primarily intended
to protect investors and generally grant broad rulemaking and enforcement powers to regulatory agencies.
Federal Initiatives Affecting Insurance Operations
The U.S. federal government generally does not directly regulate the insurance business. However, the
Dodd-Frank Act established the Federal Stability Oversight Council (“FSOC”), which is authorized to subject
non-bank financial companies deemed systemically significant to stricter prudential standards and other
requirements and to subject such companies to a special orderly liquidation process outside the federal
Bankruptcy Code, administered by the Federal Deposit Insurance Corporation. In April 2012, FSOC adopted
final rules for evaluating whether a non-bank financial company should be designated as systemically significant.
As of December 31, 2013, FSOC has designated three non-bank financial companies as systemically significant.
Insurance company subsidiaries of systemically significant companies would remain subject to liquidation and
rehabilitation proceedings under state law, although the FSOC is authorized to direct that such a proceeding be
commenced against the insurer under state law. Systemically significant companies are also required to prepare
resolution plans, so-called “living wills,” that set out how they could most efficiently be liquidated if they
endangered the U.S. financial system or the broader economy. Insurance companies that are found to be
systemically significant are permitted, in some circumstances, to submit abbreviated versions of such plans.
Proposed rules regarding heightened prudential standards for systemically significant companies would impose
new capital, liquidity, counterparty credit exposure and governance standards, and they would also subject such
companies to restrictions on their activities and management if they appear to be at risk of liquidation. There are
not exceptions for insurance companies in these proposed regulations. FSOC’s potential recommendation of
measures to address systemic financial risk could affect our insurance operations as could a determination that
we or our counterparties are systemically significant.
The Dodd-Frank Act also established FIO within the United States Department of the Treasury (“Treasury
Department”). While not having a general supervisory or regulatory authority over the business of insurance, the
director of this office performs various functions with respect to insurance, including serving as a non-voting
member of the FSOC, making recommendations to the FSOC regarding insurers to be designated for more
stringent regulation and representing the U.S. in the negotiation of international insurance agreements with
foreign insurance regulators. The Dodd-Frank Act also required the director of FIO to conduct a study on how to
modernize and improve the system of insurance regulation in the United States, including by increasing national
uniformity through either federal involvement or effective action by the states. The director issued that report in
December 2013, recommending, in part, increased federal involvement in certain areas of insurance regulation to
improve uniformity, and setting out recommendations in areas of near-term reform for the states, including
prudential and marketplace oversight. The report also recommended, in part, that states develop a uniform and
transparent solvency oversight regime for the transfer of risk to reinsurance captives, and adopt a uniform capital
requirement for reinsurance captives, including a prohibition on transactions that do not constitute legitimate risk
transfer. FIO has an ongoing charge to monitor all aspects of the insurance industry and will monitor state
regulatory developments, including those called for in its report and present options for federal involvement if
deemed necessary.
Federal legislation and administrative policies in several areas can significantly and adversely affect insurance
companies. These areas include federal health care regulation, pension regulation, financial services regulation,
federal tax laws relating to life insurance companies and their products and the USA PATRIOT Act of 2001 (the
“Patriot Act”) requiring, among other things, the establishment of anti-money laundering monitoring programs.
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