State insurance commissioners in the U.S. have agreed to adopt a code that helps track insurers doing business in multiple countries.
The National Association of Insurance Commissioners (NAIC) said it will add the Legal Entity Identifier (LEI) to insurance industry regulatory reporting. The LEI project is coordinated by the Financial Stability Board and endorsed by the G-20.
Regulators have in the past had difficulty tracking entities beyond country borders, as current registries are unique within countries and across different markets. This was particularly a problem with derivatives counterparties and exposures during the financial crisis, according to the NAIC.
“The LEI system will improve the ability of insurance and other financial regulators to track, analyze and understand interconnectedness, risk exposures and systemic issues in a global marketplace,” said Kevin M. McCarty, NAIC president and Florida insurance commissioner. “This project represents a significant improvement in global transparency.”
The LEI is scheduled for launch in March 2013 when the new reporting requirements become effective.
The LEI project assigns a unique 20-digit identifier to any entity that engages in financial transactions. The project determines what entity is eligible to have an LEI and the rules under which they are assigned. In addition to the identifier itself, there will also be reference data maintained by the registrars.
While the LEI project determines eligibility, it is up to financial regulators to decide when the LEI is required and how it should be used.
U.S. insurance regulators have been involved in its development since early in 2011.
The proposal to add the LEI was exposed for comment in June and discussed among regulators and industry participants at the Atlanta Summer National Meeting, after which the proposal was adopted.