The structure of state insurance regulation presents “inherent obstacles” to promoting global insurance competitiveness, a reinsurance industry executive and former Federal Reserve Board governor contends.
“Even if these could be removed,” said Roger Ferguson, chairman, member of the executive committee and the head of financial services for Swiss Re America, and a former vice chairman of the Board of Governors of the Fed, “issues such as enforceability and constitutional restraints remain.”
Indeed, added Brad Smith, vice president of international relations for the American Council of Life Insurers–which is a strong supporter of an optional federal charter–the very job description of state insurance regulators and their limited resources inherently restrict their ability to help U.S. insurers open global markets.
Smith also said that insurance regulators who get involved in international insurance issues are “courageous,” because their primary job is regulating insurers, not advocating for overseas competition. Normally, that is left to state trade agencies, he said.
And Alessandro Iuppa, chief government affairs officer for Zurich North America, and a former state regulator who also served as chief U.S. representative for an international insurance regulatory body, also acknowledged the difficulty of state insurance regulators to represent U.S. insurance on international issues.
“For global activity, it is imperative that regulators also have a global perspective,” said Iuppa. “While U.S. regulators, myself included, for many years have been engaged in international matters, it has been and will continue to be difficult if not impossible for state regulators to execute upon agreements that may be reached in [international] meetings.”
These comments were made at a seminar– “Will an optional federal charter for insurers increase international insurance competition?”–held by the American Enterprise Institute last month.
Iuppa, Ferguson and Smith all said some form of optional federal charter was important for improving the international competitiveness of U.S. insurers.
But Thomas Hampton, commissioner of the D.C. Department of Insurance, Securities and Banking, defended state regulation at the seminar.
“Insurance is a unique financial product that focuses on the transfer of pure risk to protect consumers’ property, health, income, businesses and lives,” Hampton said. “The state-based regulatory system for insurance has proven itself adept at meeting its primary goals of consumer protection and marketplace strength,” he added.
Regarding the U.S. role in international insurance regulation, Hampton said the National Association of Insurance Commissioners has an “active role” in international associations of insurance supervisors.
In addition, he said, “this interaction with non-U.S. regulators exposes U.S. regulators to other regulatory practices, which benefits NAIC’s discussions of ways to improve the U.S. regulatory system.”
At the same time, he said, “U.S. regulators are able to influence and, in many cases, lead discussions of global practices at the International Association of Insurance Supervisors, and the Organization for Economic Cooperation and Development.