Industry Panel Sees Evolving Relationship Between NAIC, Global Regulatory Movement
January 9, 2014 by Best's News Service
OLDWICK, N.J. – A recent array of global regulatory bodies and standards have emerged, profoundly affecting some U.S. insurance organizations, which until recently took most of their direction from state insurance regulators. Once again, the fall national meeting of the National Association of Insurance Commissioners, held Dec. 15-18, saw commissioners moving to respond to international efforts to regulate insurers operating across global markets. Following the meeting a panel of industry observers participated in a Best’s Review webinar wrapping up the NAIC meeting. The following is an edited excerpt from that discussion.
LEE McDONALD (A.M. Best Co.): Howard, perhaps we could start the discussion on non-U.S. or international activities with you. Obviously, a big force for 2014 is going to be some of the global bodies, [International Association of Insurance Supervisors] and global capital standards and all of that. What are you seeing as far as the NAIC’s treatment of that and what do you expect going forward?
HOWARD MILLS (chief adviser, insurance industry group, Deloitte): Sure, Lee, and I think we’ve heard a lot at the NAIC last week was increasing concern around some of the issues coming out of the IAIS, specifically the move at the IAIS to try to push a global capital standard. You heard a number of very prominent state insurance commissioners make statements like this is an extremely aggressive timetable and so forth, but really kind of expressing some skepticism that it could or should move at such a rapid pace.
It’s kind of similar to the impact of the [Federal Insurance Office] report on the NAIC. Again, the IAIS is not a regulator. They have no authority to tell any state commissioner what to do. But they are becoming influential by virtue of the fact that they exist and all of the regulators globally are so interconnected now. I attended the last IAIS in Taipei in October and there were about 10 or more state insurance commissioners there in attendance. The discussions at the IAIS, while they cannot be imposed upon the United States, they are impacting what’s going on here in the U.S.
I think the [Own Risk and Solvency Assessment] is a good example of that. ORSA started as part of Solvency II. The NAIC didn’t adopt Solvency II. They had their solvency modernization initiative. But ORSA kind of grew out of those discussions. I don’t think that we’re going to see a global capital standard moving on the time frame the IAIS has outlined. If you listened to the state insurance commissioners in Washington last week, that clearly is not going to happen in the U.S. But they are talking about it and they are very engaged. I think that it behooves everyone, industry and all interested stakeholders, to pay close attention to the discussions that are happening in the international regulatory area.
McDONALD: Deirdre, what is PCI’s view on some of the internationalization that is going on?
DEIRDRE MANNA (vice president, political engagement & regulatory affairs, Property Casualty Insurers Association of America): I was just going to make a couple of comments. One of the items that took place at the NAIC is that the G Committee, the international insurance relations committee, did submit their comments to the IAIS on the conference consultation draft. We agreed with the NAIC’s comments, which really focused on improving the use of supervisory colleges for large international insurance groups and really to focus on regulatory efficiency and also opposing conferring additional layers of regulation for these groups. The only other comment I wanted to make about the IAIS, and you’ve heard this from a lot of regulators too — we talked a lot about transparency on this call and transparency at the NAIC and their goal is to increase it and PCI’s goal is to increase it. This is an issue at the IAIS and something that we would like to see some improvements on there.
McDONALD: Neil, what is your group’s position on what’s taking place internationally?
NEIL ALLDREDGE (senior vice president, state & policy affairs, National Association of Mutual Insurance Companies): We share the concern about the global capital standard in particular. We’re not even sure that concept really even exists in reality. We’re glad to see some at the NAIC now beginning to have little bit more of a voice. I think the NAIC is beginning to find their backbone on their issue. I thought for too long they sort of had almost this Eeyore mentality of just tell us how bad it’s got to be and we’ll have to do it because we don’t have any choice. I think that is beginning to change. I think that’s a change for the better and one that will help the U.S. industry in the long run.
Otherwise, I think there’s no doubt that we all are going to have to spend more time and pay more attention to what’s going on internationally. It’s funny. It’s a little ironic that the NAIC points to the IAIS and wants the IAIS to have more transparency, given our earlier discussion. But they’re clearly right about that. The only thing probably less transparent than the NAIC is probably the IAIS, in the insurance regulatory world anyhow. They’re dead on in that. We have a lot of concerns. At the end of the day, we still have the vast majority of U.S. companies that probably never will do business internationally. There are a couple thousand property/casualty companies in the United States, most of whom will only ever do business in the United States. I think a lot of times that gets lost in this debate. Hopefully, this new voice and new kind of backbone by the NAIC will help. Maybe they found something there and we would encourage that.
McDONALD: Wes Bissett, does the ‘Big I’ have much on this? Do you pay much attention to this issue?
WES BISSETT (outside senior counsel — government affairs, Independent Insurance Agents & Brokers of America): Increasingly, in a lot of different ways. I won’t reiterate the points that Howard, Deirdre and Neil have made. We actively follow and participate in what’s happening at the IAIS through one of the international organizations of agents and brokers, known as the World Federation of Insurance Intermediaries. One of the things that has been of increasing concern for us is that there will be increased pressure on the jurisdictions within the United States to adopt and embrace some of the principles and recommendations that have been put forth by the IAIS. These take the form of what are called insurance core principles or ICPs. Sometimes they’re developed with little or no input from regulators within the United States. We worry about a situation where concepts and ideas and models that are developed on the international stage that might not make sense for agents and brokers in this country will be increasingly pushed upon jurisdictions within the United States. That’s a trend that’s something of concern to us. We agree with the other issues that the other folks have talked about as well.
To view the webcast, visit: http://www.ambest.com/webinars/naic13.
