International insurance regulators tasked with building a seamless global solvency system acknowledge that the recent financial crisis is a reminder of the need to be vigilant even though they may be approaching the solution in different ways.
The recent forum sponsored by the American Insurance Association, Washington, during the summer meeting of the National Association of Insurance Commissioners, Kansas City, Mo., included panelists: Dave Snyder, AIA vice president and associate general counsel; Yoshihiro Kawai, secretary general of the International Association of Insurance Supervisors (IAIS); George Brady, NAIC international counsel; and Hannah Grant, policy advisor for international affairs and reinsurance with the European Insurance and Reinsurance Federation (CEA). The panel which drew approximately 100 attendees was moderated by Erik Holm of Dow Jones Newswires.
Comments suggested that while the goals are largely the same, the approaches may take more discussion to bring them together.
AIA’s Snyder started by noting that the recent global financial crisis was banking and not an insurance problem. It is imperative that any standards developed for insurers be tailored to the insurance industry and reflect the needs of that business. He added that he did not think that insurers pose a systemic risk. Snyder also cautioned against duplicative regulation.
The NAIC’s Brady said a “fundamental first step was to make sure that there is proper coordination and cooperation.” Brady also noted that “solutions are coming from the banking side” and the NAIC and others in the insurance sector need to put out information about how the insurance market works, what the challenges are that it has faced and what options there are to address any challenges. The more we do this, the less likely we are to have banking solutions,” he added.
“We need to focus on what learned in crisis,” said the IAIS’ Kawai. He noted that there are financial conglomerate that include insurance as well as other entities and that it is important to make sure that the conglomerates work well.
Kawai added that high-level IAIS standards exist but there needs to be better communication with more concrete discussion and clearer supervisory language.
The CEA’s Grant said that there is “quite an opportunity right now” to start a dialogue while creating a new structure to better monitor companies operating across borders and to ensure that companies are operating in the same way.
The AIA’s Snyder said that a Federal Insurance Office is important because the “U.S. needs strong voice tech proficient but also one that is capable to make decisions.”
Kawai said that the IAIS is evolving so that in five years it will be a much stronger organization with a structure that will better be able to serve members and observers. The organization is scheduled to decide at an October meeting how to achieve this end, he added.
The discussion also centered on why the United States should be part of the first group of countries to be given equivalence by the Committee of European Insurance and Occupational Pensions Supervisors CEIOPS which is part of the Solvency II Directive. Final advice on the first wave is expected at the end of August, according to Grant.
Snyder said that a letter was submitted urging that the U.S. be in the first wave because it meets the principles necessary to be in compliance with equivalence standards even if some work still needs to be done on points such as confidentiality.
Grant said that it benefits both Europe and the U.S. if the U.S. meets equivalence standards because there is a huge flow of insurance business moving between the two world regions.