New bill could prevent insurers from providing protection against clawbacks
Financial firms may no longer be able to purchase insurance policies that provide them with protections against civil penalties or compensation clawbacks if a new legislation introduced by Representative Barney Frank is successful. Clawbacks have become a somewhat popular form of censure for executives looking to reclaim compensation from one another. This practice can sometimes be damaging to an individual’s finances, a possibility that has spawned its own form of insurance coverage. Representative Barney Frank believes that clawbacks are an effective way to ensure that executives of large financial companies remain honest and is looking to ban insurers from providing protection against the practice.
Bill claimed to be the result of public outcry concerning financial matters
The legislation aims to protect the 2010 Dodd-Frank reform law, according to Representative Frank, as well as the integrity of others. Together, these laws enable federal insurance and financial regulators to recover funds that were lost due to the acts of individuals who break them. Frank believes that new legislation is necessary in order to ensure that executives of financial firms are complying with federal laws. As such, Frank claims that his latest bill is the result of public outcry concerning the ongoing controversy over the large salaries that some executives are being paid, despite their role in the economic crisis.
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Financial executives to be held responsible if legislation becomes law
If the legislation successfully becomes a law, those targeted by clawback actions will be considered personally liable for payments. Insurers would not be able to honor or write policies that are designed to protect against clawbacks. Without this insurance protection, executives could face serious financial losses that could translate to instability for their personal lives.
Support expected to come from lawmakers favoring financial and insurance reforms
The legislation is expected to garner a large amount of support from lawmakers who support financial and insurance reforms. These lawmakers have, in the past, supported making changes to federal laws in the wake of the economic disaster that crippled the country. The insurance industry has, thus far, remained neutral on the issue.