PCI Responds to IAIS Proposals; Urges ‘Freedom to Structure Co. Operations’

December 17, 2012

The Property Casualty Insurers Association of America (PCI) has issued a statement urging the International Association of Insurance Supervisors (IAIS) “to better target its proposed ‘policy measures’ for any insurance groups found to be ‘global systemically important insurers’ (G-SIIs) to systemically-risky activities, rather than affecting the insurance business of any selected groups.”

International insurance think tank, The Geneva Association, has also published its response to the latest publication in an IAIS released draft proposal in October, urging caution in applying any proposed rules to insurance groups.

Steve Broadie, PCI’s vice president of financial policy, commended the IAIS for reiterating its position that the traditional insurance business model does not pose systemic risk. But he also strongly urged the IAIS to “better focus its proposed policy measures on systemically-risky activities because the IAIS’ proposals for increased regulation could harm G-SIIs and their consumers as they carry out their traditional insurance activities.”

In its response bulletin the PCI urged the IAIS to observe several key general principles, which it listed as follows:
— The measures should be directed at the few non-insurance and non-traditional insurance activities that are actually systemically important, and should aim to reduce the risk of those activities by improving risk management, rather than induce insurance groups not to engage in those activities.
— The activities that pose systemic risk should be more carefully defined, and only those activities should be included in the definition. There should be a clear link between those activities and the measures designed to reduce their risk, and that definition should provide insurers the certainty needed to decide whether or not to engage in those activities.
— The measures should not be applied on a uniform, one-size-fits-all basis, but rather only as needed, based upon an individual G-SII’s particular circumstances.
— The IAIS should state that these are extraordinary measures that should not be applied to the overwhelming majority of insurers that are not systemically important.
— Any additional capital requirements should be applied only to the activities that pose systemic risk. No additional capital should be required at the group level, where such a capital add-on would be harmful to traditional insurance activities, as well as the policyholders they serve.

The PCI also has filed comments with the IAIS on the importance of allowing companies to compete with different business structures. These came in response to a draft paper on regulating insurance company branches.

Dave Snyder, PCI’s vice president for international policy, stated: “Insurance companies establish themselves differently for appropriate reasons, including efficiency. Limiting the freedom to do so may harm competition. In addition, a survey of supervisors conducted by IAIS makes clear that supervisors have the authority they need to assure consumer protection, regardless of how a company does business.”

Source: Property Casualty Insurers Association of America

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