The NAIC’s point man on international regulatory affairs in the wake of former CEO Dr. Terri Vaughan’s departure is shaping up to be Connecticut Insurance Commissioner Tom Leonardi.
Leonardi was recently named to the executive committee of the International Association of Insurance Supervisors (IAIS), the Connecticut Insurance Department announced today. Leonardi fills Vaughan’s old seat and does it as a state regulatory, not as an administrator. This means new NAIC CEO Ben Nelson, the former Nebraska governor and senator, won’t directly be replacing Vaughan there at this time.
Leonardi joins NAIC Immediate Past President Kevin McCarty, Florida insurance commissioner, as the current NAIC representatives on the IAIS Executive Committee. The NAIC Executive Committee can consider changes in this representation at any time as circumstances may warrant.
The IAIS Executive Committee is made up of 24 individuals representing nine regions worldwide and heads the IAIS. Each global region picks its own representatives with no intervention from other members.
After a press conference last week discussing Nelson’s new stewardship of the NAIC, Nelson said to reporters he would like to travel on international supervisory business, supported by staff although a member of the NAIC leadership said he would focus on domestic issues for now.
Nelson made a video statement running on the NAIC website against a backdrop of the U.S. Capitol discussing the national system of state-based regulation, saying it is his job to set the vision for the NAIC in support if its members and to advocate for the state regulatory structure in the U.S. and abroad –Nelson focuses on the “conservative” state-based solvency framework as a hallmark of that system.
International solvency and stability oversight and supervision is under heavy and almost constant discussion by the IAIS on several policy fronts.
Primarily, the development phase of ComFrame (Common Framework for the Supervision of Internationally Active Insurance Groups) is set to conclude mid-year, and the IAIS are scheduled to deliver the final proposed globally systemically important insurers (G-SIIs or G-SIFIs) assessment methodology at the earliest in April and send policy measures to the Financial Stability Board (FSB), which ultimately makes the decision on any and all G-SIIs.
Leonardi’s name was put forward at an IAIS meeting on Jan. 16 in New Orleans by the North America Region (U.S., Canada, Mexico), when Nelson was very close to announcing his new position.
The IAIS Executive Committee is supported by committees like the FSC and the Technical Committee, which is headed by Federal Insurance Office (FIO) Director Michael McRaith. The other support committees are the Implementation Committee and the Budget Committee.
The NAIC and U.S. insurers have been joining sovereign nations and other parties weighing in on a supervisory architecture that will have a great deal of impact on the global regulation of anywhere from 50 to 100 IAIGs expected to be identified worldwide by the FSB.
The Connecticut insurance commissioner has said before that capital and some other quantitative standards should not be imposed globally and supersede local regulation.
Leonardi, who sits on nine supervisory colleges, said that “to have a lead regulator that has ultra-powers would be detrimental.”
Leonardi, along with other state regulators, has been a vocal opponent of the one-size-fits-all approach he believes the international regulatory solvency framework is taking with Solvency II.
The NAIC is developing its own supervision requirement of Solvency II with ORSA, the proposed Own Risk and Solvency Assessment requirement for insurance holding companies, a U.S.-wrought Solvency II initiative.
Actual implementation of the ORSA manual won’t be sooner than an effective date of Jan. 1, 2014, if not later, because critical issues remain. The ORSA Manual, if adopted by the NAIC and then individual states, would apply the ORSA requirement to stand-alone insurers with premiums exceeding the manual’s exemption threshold.
Leonardi also said the ComFrame process should not create an unleveled playing field nor have unintended consequences with the IAIGs versus all other entities. Back in October at the IAIS meeting in Washington, Leonardi said a successful model was the NAIC model holding company act, which Connecticut passed in June, that gives the state insurance regulator the power to oversee all parts of the group, to participate in supervisory colleges, and to even ask for the financials of any part of the insurer, even if it’s “a railroad company in South Africa” or a company in an unrelated business in Japan and allows for confidentiality of data, which the state financial exams law do not.
Also, in committee assignments given to state regulators by NAIC leadership every January, Leonardi has been given the chairmanship of the NAIC’s International Committee. He was formerly vice-chair.
Leonardi, who has been an appointed state commissioner for almost two years, is already a member of the IAIS’ Financial Stability Committee (FSC) and the only U.S. regulator on that committee.
The IAIS, which is meeting now in Basel, Switzerland, has important decisions and work before it this year, work that directly affects, or possibly could, many U.S. insurers, and issues in which Leonardi is deeply involved..
Also a member of the U.S. Treasury Department's federal advisory committee on insurance (FACI), Leonardi has been active on the states' role and the IAIS role in oversight of large internationally active insurance groups.
In June 2012, the IAIS accepted Connecticut’s invitation to hold its FSC meeting in Hartford. In February 2012, Connecticut became the first U.S. insurance regulator to join the IAIS’ Multilateral Memorandum of Understanding, a framework that establishes a formal basis for global cooperation and information exchange among insurance regulators.
In a release issued by Connecticut's insurance department, Leonardi stated, “It is essential that the U.S. insurance industry operate on a level playing field and that foreign-based carriers that do business here are financially stable enterprises. The end result is a robust, competitive market that provides greater consumer choice and a strong insurance sector that helps drive our economy.”
Leonardi is a member of the bar of the state and federal courts of Connecticut and New Jersey. He earned a bachelor’s degree from Boston University with distinction in history, summa cum laude and Phi Beta Kappa. He earned a J.D. with honors from the University Of Connecticut School Of Law. Leonardi formerly led Northington Partners, Inc., an insurance specialty venture capital and investment banking firm founded in 1989.