NCOIL Capital Standards Resolution Draws Mixed Reaction From Insurance Trade Groups
July 14, 2014 by Thomas Harman
BOSTON – Insurance industry trade groups had mixed opinions concerning a National Conference of Insurance Legislators’ resolution opposing the imposition of insurance capital standards under discussion internationally.
NCOIL’s executive committee approved the resolutions on the final day of its Summer National Meeting on July 13.
The standards resolution was crafted in response to international proposals for insurer solvency regulation, including a global capital standard. Among the international proposals concerning state lawmakers, the resolution cited the G-20 Financial Stability Board’s direction to the International Association of Insurance Supervisors to create a quantitative insurance capital standard for internationally active insurance groups, a standard that impacts some large U.S. companies.
The resolution said NCOIL wants the National Association of Insurance Commissioners, the Federal Insurance Office and the U.S. representatives to the Financial Stability Board “to oppose the creation of any additional set of international solvency standards, including a global insurance capital standard, that fails to adequately and appropriately accommodate the proven U.S. approach to insurer solvency regulation.” NCOIL also seeks coordination with federal agencies and state regulators toward a position consistent with states policies and laws regarding global insurance capital standards. The global capital standard, the resolution said, is unnecessary and duplicative and would not recognize jurisdictional differences such as accounting standards and state-required use of statutory accounting principles, or significant differences in risk and capital needs between insurance groups (Best’s News Service, July 11, 2014).
The American Insurance Association was concerned about the resolution, because it failed to mention ongoing implementation efforts by the Federal Reserve to create a differentiated capital standard for insurers organized as depository institutions or designated as systemically important financial institutions by the Financial Stability Oversight Council. “Nor does it acknowledge the longstanding and deep commitment of the NAIC and commissioners at the international level in the work of the IAIS,” Joe DiGiovanni, AIA’s senior vice president of state affairs , said in a statement. “It assumes the IAIS capital standards will yield a product that cannot accommodate the U.S. approach to capital, yet the [insurance capital standards] discussions are just beginning.”
The Property Casualty Insurers Association of America supported the resolution. Frank O’Brien, PCI vice president state government affairs, said NCOIL President Neil Breslin, a New York state senator, recognizes the importance of protecting the U.S. state-based system of insurance regulation. “It is essential for state and federal officials embrace a coordinated policy position to keep in check international mission creep as some international bodies attempt to expand their influence beyond their scope of responsibility.”David Snyder, PCI’s international vice president, said NCOIL’s actions send a clear message to all U.S. and international decision makers.
The AIA said it is working with the IAIS, the NAIC, the FIO and the Federal Reserve to shape the development of the new international standards. The AIA recommended any global capital standard take a risk-focused approach to capital assessment that accommodates different jurisdictional frameworks, including that in the United States.
The AIA also was concerned about the resolution concerning principles of state sovereignty in international trade, which calls on more transparency in talks regarding the Transatlantic Trade and Investment Partnership, the Trans-Pacific Partnership and the Trade in Services Agreement.
“The resolution fails to recognize measures that protect the role of states in regulation, as well as regulatory safeguards that are in all U.S. trade agreements, and ignores the enormous benefits of trade agreements to the U.S. insurance sector,” DiGiovanni said.
The National Association of Mutual Insurance Companies favored both the capital standards resolution and a resolution seeking more transparency in international talks that would give lawmakers a voice internationally.
An NCOIL Task Force Advisory Council also made progress toward a series of proposed amendments to NCOIL’s Model Unclaimed Life Insurance Benefits Act, currently in place in 15 states and under consideration in six others. The panel changed some of its planned amendments that would have allowed prospective application of the model or retroactive applications only in cases where companies practiced asymmetrical matching. Instead, the panel moved to retain existing retrospective provisions, but consider allowing regulators more discretion to ease model implementation.
The task force will continue to work on the model amendments in the hope of gaining a final vote of approval when NCOIL meets Nov. 20-23 in San Francisco.
(By Thomas Harman, associate editor, BestWeek: Tom.Harman@ambest.com)
