U.S. insurers are asking regulators to ramp up efforts to advocate for American standards as global insurance standards are created.
A call to create a stronger U.S. presence was expressed by both life and property-casualty companies here during the summer meeting of the National Association of Insurance Commissioners, Kansas City, Mo.
The most recent cause for concern was the adoption of an accounting paper by the International Association of Insurance Supervisors, Basel, Switzerland.
In May, the IAIS technical committee published its second set of observations addressing the valuation of insurance liabilities for general purpose financial reporting.
U.S. insurers are arguing the paper needs more work and that it was put out prematurely to meet a proposed year-end deadline for a discussion paper of the International Accounting Standards Board, London.
During the meeting of the International Solvency Initiatives working group, trade groups represented by Steve Broadie, vice president-financial legislation and regulation at the Property Casualty Insurers Association of America, Des Plaines, Ill., presented concerns of industry participants.
In addition to PCI, the trades offering comment were the American Council of Life Insurers, the American Insurance Association, the Reinsurance Association of America, all in Washington; the Group of North American Insurance Enterprises, New York; the National Association of Mutual Insurance Companies, Indianapolis; and Verband der Versicherungsunternehmen ?sterreichs, Vienna.
The U.S. trades have expressed concern that the IAIS paper calls for market consistent valuation of insurance liabilities even though IASB and the Financial Accounting Standards Board, Norwalk, Conn., still are debating the measurement of such liabilities.
The U.S. trades also are concerned that the IAIS paper calls for an exit value model for insurance accounting. The trades say it is premature to conclude whether that approach is appropriate.
The trades also have expressed concern over the use of margins over current estimates as a way to incorporate liabilities over the contract life into a one-year time horizon.
But Rob Esson, an NAIC staff person representing regulators on international matters, disagreed with the trades’ assertions on risk margin, noting that Principle 50 in the IAIS paper says the margins should be set at a level of a portfolio of “similar,” not identical, obligations. He added that points in the trades’ concerns such as the risk margins being “new and untested” were not quite true.
In a session of the International Insurance Relations Committee, NAIC President Alessandro Iuppa, who is also chair of the IAIS executive committee, said the NAIC is vigorously making the case for U.S. standards in its discussions with international regulatory bodies.
Dave Snyder, an AIA representative, said that what is important going forward is that regulators strongly make the case for U.S. accounting standards.
“The U.S. is the most sophisticated insurance market in the world,” Snyder said. “As such, we have a pretty good way of doing things. The NAIC is not as strong an advocate as it needs to be for the U.S. system, which should become an international standard. It needs to be more aggressively defended than what we have seen so far.”
There need to be more commissioners in attendance at IAIS committee meetings, according to Snyder.
One problem is that state regulators are representing the United States, while national regulators are representing most other countries, Snyder said.