James J. Wrynn, Esq. served as New York’s Superintendent of Insurance from 2009 to 2012, when he joined the law firm of Goldberg Segalla LLP, which specializes in insurance law. His knowledge and experience are both broad and deep, especially in the regulatory field, where he has played a key role in developing national and international regulations and policies governing the insurance industry.
At the recent recent Reinsurance Rendez-vous in Monaco, Wrynn discussed his history and his new role bringing his expertise to the private sector as head of Goldberg Segalla’s New York office.
“I was very fortunate to serve as Superintendent during challenging and interesting times,” he said. “There was so much going on, a lot due to a great extent to the financial crisis, at the state, national and international level.”
He was a participant at all of those levels: vice chairman of the “G Committee” with the National Association of Insurance Commissioners (NAIC), a member of the stability committee, working on “coming up with a methodology to identify ‘systemically relevant’ companies,” the initiative called ComFrame that focused on the regulation of international insurance groups, group supervision, and international accounting standards.
At the national level Wrynn worked on the Affordable Care Act and the Dodd-Frank Act, which included the creation of a federal insurance office. He was also involved with the NAIC on the solvency modernization initiative, which, he explained, is a “complete reassessment of the United States insurance regulatory framework,” comparing it to other international standards and assessing methods of calculating credit for reinsurance.
At the state level he focused on New York and streamlining insurance processes with the “modernization initiative.” He worked with the state legislature on the “life settlements bill;” on a statute to regulate health premium rates, and the creation of “a new department of financial services, where we merged banking and insurance to create a more comprehensive regulatory structure at the state level.”
That initiative, which also resulted in the elimination of the post of Superintendent of Insurance, doesn’t mean that regulators see banking and insurance as being the same. With the exception of AIG, whose troubles, Wrynn noted, didn’t stem from its insurance activities, most insurers came through the financial crisis reasonably well.
“With insurance you don’t have the liquidity and the leverage issues that you have on the banking side, he said, “and really with the traditional business of insurance, which is a very conservative business with reserving and capital solvency requirements, it does not have the potential to generate or amplify systemic risk.”
He explained, however, that as re/insurers evolve they create more complex products with “more capital market type exposures.” Even if the traditional business of insurance doesn’t amplify systemic risk, “some of the activities that they are now engaging in could.” While the main concern is with the life side, Wrynn also said “we’ve seen with credit default swaps that there could be certain types of specific activities that companies are engaged in on the non-life side that could be systemically relevant.”
Goldberg Segalla is putting Wrynn’s expertise to use working on enlarging the firm’s regulatory practice activities, and has already been able to give some of its clients the benefit of that experience. One of his main aims is to help them “to avoid any regulatory issues” by being “proactive” and anticipating issues before they are raised.
Wrynn was involved with the European Union “on one of the early dialogues on Solvency II” –the long delayed provisions for regulating insurance within the EU. He said: “I’m a believer that once you get into the specifics, you’ll see that there’s probably more in common than what we disagree on. That was the case here. I don’t think there’s anyone in the U.S. who doesn’t think Solvency II is a good initiative for the EU, but there are certain aspects of it that they feel should be more closely reviewed.” These include “valuation issues, the use of internal modeling to the extent that it’s going to be used and certain investment type proposals.” All of these, he noted, are “Pillar One” issues, i.e. they regulate capital requirements.
Many of the provisions of Pillar Two, which “has a more qualitative type of focus,” have “already started to be incorporated in the U.S. regulatory system.” It is a good initiative, but Wrynn repeated his caveat that it should be more carefully reviewed in order to avoid any “unintended consequences” when it is finally adopted.
Although the U.S. does have 50 state regulatory entities, plus the federal government, Wrynn said that this doesn’t mean they are all issuing separate regulations. “We have a national system of state-based regulation, and we have an accreditation process, so every state has to basically follow the same rules with respect to the entities and the solvency of the entities they regulate, and if they don’t they won’t pass accreditation.” He also stressed that “it has worked very well,” as there have been far fewer insolvencies in the insurance industry, compared to other types of activity.
The U.S. regulatory system can, however, be improved, and the NAIC is working on doing so. “They are working with all of the commissioners, trying to streamline processes, create uniformity where you can. It does work. “The proof of the pudding is in the success that the insurance industry has had in the United States for many, many years.”
Wrynn had already moved on when Sandy struck the east coast, but his prior work, notably following Tropical Storm Irene, had a big influence on the disaster response mechanisms that were in place to deal with the “Surperstorm.”
He explained that his department was “proactive. We actually shut down the offices in New York City, and went up to Albany. So I was in Albany when the tropical storm hit, and we set up the IEOC, the Insurance Emergency Operations Center.
“After the storm hits we get representatives from each of the major insurance companies into a room; we set up a computer terminal, telephones, whatever they need, so that we can collectively respond to the storm, as needed – whether we need to send adjusters someplace, whether emergency vehicles are needed – and it works very, very well.”
As a result, when Superstorm Sandy hit, New York had the plans in place to deal with it, or at least to deal with what it could deal with in the wake of such a devastating storm. “I think the department deserved a tremendous amount of credit for their response, as do the citizens in the affected areas,” Wrynn said. “They all got together to help one another out, and I’ve got to give credit to the insurance companies, who also did overall a very remarkable job in getting the adjusters out there and addressing the needs of the insureds promptly.”
Asked about the Reinsurance Rendez-vous as a first time participant, Wrynn observed that “anyone who’s anyone in the reinsurance world is probably here for this conference, and, surprisingly, I’m in Manhattan, where my main office is, and I haven’t seen people for a year, and I’ve met a lot of them here today. I have to come to Monaco to see people who have offices down the block from my office.”