Having carefully written insurer solvency rules is important, but good regulations are no substitute for vigilant supervision of insurers and other financial services companies.
Therese Vaughan, chief executive officer of the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., made that argument earlier this week in Austin, Texas, during a session organized by the NAIC’s Solvency Modernization Initiative Task Force.
Vaughan talked about efforts by the International Association of Insurance Supervisors, Basel, Switzerland, to develop a “Common Framework for the Supervision of Internationally Active,” or “ComFrame.”
ComFrame is still in an embryonic stage, and its exact nature is still under discussion, but the intent is to define how regulators will work together to supervise internationally active groups, Vaughan said.
The NAIC is devoting significant resources to ComFrame, and the United States is in a unique position, because it has many years of experience with supervising insurance groups across state lines, Vaughan said.
Vaughan argued that insurance regulators should try to make sure that they are clear about what problem they are trying to solve.
Insurance regulators should deal with issues that actually affect insurance and insurers, not simply adopt standards because banks are adopting standards, Vaughan said.
Vaughan said problems that may affect the insurance industry include “regulatory arbitrage,” or