Property Casualty Insurers Association of America, Others Make Formative Recommendations On NCOIL International Issues Task Force Creation of Working Groups

Jun 13, 2014


“Mission creep,” state-federal coordination, reinsurance collateral and Solvency II equivalence, group supervision, and the development of international capital standards were suggested by the Property Casualty Insurers Association of America (“PCI”) to the National Conference of Insurance Legislators International Issues Task Force (“Task Force”) as the 2014 “top issues” upon which to base the creation of targeted working groups moving forward.

PCI’s recommendations were among a list of others submitted by interested parties in advance of a discussion scheduled for June 17, 2014 from 11:00 a.m. to 12:00 p.m. (EDT).  Next week’s meeting is intended to lay a foundation for action at a July 10, 2014 Task Force session during the NCOIL Summer Meeting in Boston.

To view the recommendations, click on the hyperlinks below:

To ensure states’ representation in discussions with regard to the ” . . . engagement of the U.S. Treasury and the Federal Reserve Board in international activities relating to the regulation of insurance in closed door banking-dominated forums . . . ,” PCI suggested that a process should be established whereby the agencies consult with state and insurance industry representatives to arrive at consensus positions, since some federal positions are different from and even contrary to the positions of state regulators, resulting in the lack of a consistent U.S. position that could lead to unforeseen systemic risk.

In regard to the development of international capital standards and group supervision, PCI related that last summer, the Financial Stability Board (“FSB”) directed the International Association of Insurance Supervisors (“IAIS”) to come with a Basic Capital Requirement (“BCR”) for global systemically important insurers (“G-SIIs”) and a quantitative capital standard (“ICS”) for Internationally Active Insurance Groups–all within timeframes that PCI described as “unrealistic.”  

Particularly, the ICS direction was unsupported by any objective evidence of need and cost/benefit analysis, PCI said.  These dictates triggered strong fears of unnecessarily higher capital, the implementation of a bank-centric approach and the imposition of another insurance regulatory system on U.S. insurers that does not fit their market.

As a solution, PCI suggested taking more time to create the BCR, and also reversing the direction on the ICS, so as not to mandate it.  However, PCI pointed out that the IAIS is aggressively moving to design and implement the BCR and ICS according to FSB demands.

Insofar as reinsurance collateral and Solvency II equivalence, PCI reminded that additional measures for the elimination of collateral are under consideration as states continue to implement the National Association of Insurance Commissioners’ Reinsurance Collateral Model Law and Regulation.

Notwithstanding that progress is occurring on the reduction of collateral, PCI explained that U.S. companies run a strong risk of being discriminated against in the European Union if the U.S. regulatory system is not deemed to be the equivalent of Solvency II.

To counter, PCI said, the U.S. should advocate full and permanent Solvency II equivalence with regard to reinsurance, group supervision and group capital in return for action on reinsurance collateral by the end of 2015, inasmuch as Solvency II is scheduled to become effective on January 1, 2016.


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