As business becomes more globalized, the financial services industry, including insurance, has recognized the need to keep up with the changing times.
Both U.S and European Union regulators have therefore embarked on several initiatives requiring mutual discussion and cooperation, as whatever rules are imposed on one side of the Atlantic will inevitably affect the other side.
Even though the EU has moved at a glacial pace in adopting the final form of its Solvency II regulations – they are now scheduled to go into force by the beginning of 2013 – their potential impact on insurance companies based in the U.S., Bermuda, Japan and elsewhere is substantial.
The National Association of Insurance Commissioners has undertaken a similar program with its Solvency Modernization Initiative (SMI). The main sectors being discussed, and the committees tasked with doing so, include the following:
• Capital Requirements, which will be coordinated with the Capital Adequacy (E) Task Force;
• International Accounting, which will be coordinated with the Statutory Accounting Principles (E) Working Group as well as the International Accounting Standards (EX) Working Group;
• Group Supervision, which will be addressed by the Group Solvency Issues (EX) Working Group;
• Valuation Issues in Insurance, which will be coordinated with the Principles-Based Reserving (EX) Working Group; and
• Reinsurance, which will be coordinated with the Reinsurance (E) Task Force.
All of those sectors require consideration of what’s going on outside of the U.S. The NAIC described SMI, which got underway in 2008, as a “critical self-examination of the United States’ insurance solvency regulation framework and includes a review of international developments regarding insurance supervision, banking supervision, and international accounting standards and their potential use in U.S. insurance regulation.”
Following its summer meeting in Seattle the NAIC published a “Roadmap” that laid out the SMI’s future direction.
Last week it held two days of discussions in Washington DC with the European Commission (EC) and the European Insurance and Occupational Pensions Authority (EIOPA), which it described as “designed to better understand the challenges they face with regard to international insurance regulation, as part of the ongoing US-EU insurance regulatory dialogue.” Topics discussed included “solvency modernization and group supervision, as well as systemic risk and financial stability.”
The first session was “regulators only;” the second included representatives the “Transatlantic Insurance Symposium hosted by the US Chamber of Commerce. The purpose of the symposium was to exchange information regarding the US and EU insurance regulatory frameworks. Topics of the symposium included the EU’s Solvency II reforms, the US Solvency Modernization Initiative, and implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.”
In her address to the meeting Susan E. Voss, NAIC President and Iowa Insurance Commissioner, stated; “There are two key trends I see in international insurance regulation that we should be focused on – the need for enhanced international supervisory coordination, and increased convergence to international standards.
“There are a lot of parallels between the EU system and our national system of state-based regulation. Both benefit from a high level of coordination while remaining flexible to the needs of individual markets. Continued engagement is key to ensuring consumer protections and viable insurance markets both in the US and abroad. ”
The NAIC also noted that the following members also presented their views at the meeting: Kevin M. McCarty, NAIC President-Elect, Chair of the NAIC International Committee and Commissioner of the Florida Office of Insurance Regulation; Michael T. McRaith, NAIC Secretary-Treasurer and Director of the Illinois Department of Insurance [potential head of the FIO]; Christina Urias, Director of the Arizona Department of Insurance; James J. Wrynn Superintendent of the State of New York Insurance Department; and Therese M. (Terri) Vaughan, Ph.D, NAIC Chief Executive Officer.
Source: National Association of Insurance Commissioners