* Insurers sell bankers protection against pay claw-backs
* Frank: Need bill to preserve Dodd-Frank, Sarbanes-Oxley
* Marsh launched protection program last year (Adds JPMorgan context)
WASHINGTON/BOSTON, May 30 (Reuters) - Executives at financial firms would no longer be able to buy insurance to protect themselves against compensation claw-backs or civil penalties under legislation introduced on Wed nesday by U.S. Representative Barney Frank.
The bill, Frank said, is aimed at protecting the intent of the 2010 Dodd-Frank financial reform law, the 2002 Sarbanes-Oxley Act and other laws that let federal regulators recoup compensation or impose fines on individuals who break the law or engage in unsafe conduct.
"The creation of insurance policies to insulate financial executives from claw-backs is one more effort by some in the industry to perpetuate a lack of accountability," Frank, a Democrat and co-author of Dodd-Frank, said in a statement.
The claw-back provision was inserted in the Dodd-Frank law in response to public anger that executives at banks and Wall Street firms such as AIG were still being paid large salaries and bonuses despite mistakes that fueled the 2007-2009 financial crisis.
Frank's bill ensures that anyone subject to a claw-back is personally liable for any payments, and bans insuring or hedging against that liability.
Claw-backs are under consideration at JPMorgan, which announced a $2 billion-and-growing trading loss on May 10 due to a botched hedging strategy.
JPMorgan CEO Jamie Dimon, a vocal critic of Wall Street reform, mentioned the possibility of clawing back pay from executives responsible for the trades at an annual shareholder meeting earlier this month. "We will do the right thing. That may well include claw-backs," he told reporters after the annual meeting.
Frank's bill is likely a response to an insurance program launched in early 2011 by Marsh, one of the world's largest brokerages. Its "FDIC Receivership Endorsement" protects executives and directors from claw backs by the Federal Deposit Insurance Corp.
The endorsement, which attaches to traditional directors and officers' insurance, does not defend against fraudulent behavior, but does help cover attorneys' fees and other costs. Other underwriters of D&O policies have also reportedly looked into adding claw-back coverage to their insurance.
The company has not disclosed sales for the product, though a Marsh executive told industry trade letter InsuranceNewsNet last October that executives at "dozens" of nonbank financial firms had already signed up.
A spokesman for Marsh, a unit of Marsh & McLennan, had no immediate comment.
Democratic Representatives Henry Waxman and Collin C. Peterson co-sponsored the legislation with Frank. (Reporting By Alexandra Alper in Washington and Ben Berkowitz in Boston; Editing by Jan Paschal and Dan Grebler)