The Federal Reserve (Fed) has begun a Quantitative Impact Survey (QIS) to study the impact that its regulatory capital framework would have on non-bank systemically important financial institutions (SIFI) such as Prudential Financial Inc (NYSE:PRU), Metlife Inc (NYSE:MET) and American International Group Inc (NYSE:AIG), a move that is being seen as a positive sign for how those firms will be treated.

“We believe this undertaking is critical to helping convince Fed officials that rules currently in place and designed for banking institutions are not suitable in application for insurers,” writes Sterne Agee analyst John Nadel. “It is our hope that the ultimate outcome of the QIS is a capital framework tailored specifically for insurers.”

Good News Grom The Fed For SIFI insurers

SIFI insurers waiting for Dodd-Frank amendment, regulatory clarity

SIFI insurance companies currently have a regulatory cloud looming over them because the Dodd-Frank Act gives the Fed the authority to make them adhere to the same regulatory capital rules that banks have to follow, but the Fed doesn’t currently have the flexibility to adapt those rules to insurance companies different business model. There’s bipartisan support for the amendment, but the House recently passed a version of the amendment that included some conservative provisions that are unpopular with the current Senate. Now it looks unlikely that Congress will send a bill to President Obama before the mid-term elections.

As long as nothing too partisan is attached to the final bill, President Obama is expected to sign it into law, and delaying until after the mid-terms could be an intentional decision to use the amendment for leverage assuming Republicans manage to take the Senate as some pundits have predicted. Federal Reserve chairperson Janet Yellen has been saying since the beginning of the year that she intends to tailor rules for insurance SIFIs, so there’s almost no doubt she will the authority once Congress gives it to her.

QIS signals that the Fed is confident Dodd-Frank will be amended

Even though the QIS is only the first step in adapting regulatory capital rules for insurers, that the Fed is getting started implies that it has more confidence that the Dodd-Frank amendment will ultimately be passed and wants to get a head start. We’re still a long way from final regulatory capital rules for insurance companies, and you can bet there will be plenty of complaining from major insurance companies along the way, but at least we won’t be using one-size-fits-all regulation for very different parts of the financial system.