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U.S. insurance regulators are trying to offer input on solvency systems, building on a system developed over the last 10 years.

The issue came up during two recent regulatory discussions: one involving capital adequacy and one that concerned standards now being looked at by the Life & Health Actuarial Task Force of the National Association of Insurance Commissioners, Kansas City, Mo. LHATF is looking at solvency protections on products such as variable annuities with guaranteed living benefits.

Virginia Commissioner Al Gross says that as the discussion among international insurance regulators evolves, he wants to bring the expertise that U.S. regulators are developing to the discussion.

The International Association of Insurance Supervisors, Basel, Switzerland, met earlier this year in Lisbon, where a solvency subcommittee discussed drafting a general solvency framework.

As part of that discussion, capital adequacy requirements were discussed, according to a memo from the commissioner.

The framework being considered, Gross writes, is a three-pillar approach: minimum capital standards, supervisory oversight and disclosure.

The point U.S. regulators tried to make during the discussion, according to Gross, is that while those pillars might be useful, that “perception may overtake reality.”

Gross and U.S. regulators tried to emphasize the point that there might be “an unjustified degree of overconfidence” in models rather than on specific solvency requirements.

Gross told National Underwriter that the solvency efforts are part of an overall look at a supervisory framework. The IAIS is at the beginning stages of the discussion, he continues, so any input that U.S. regulators offer will be valuable to the group.


Reproduced from National Underwriter Edition, April 23, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.