At its second public meeting on Aug. 6, the Federal Advisory Committee on Insurance (FACI), a sort of private-public armchair consultancy branch of the Federal Insurance Office (FIO) at the U.S.Treasury, signaled it was viewing U.S. insurance regulation through the wide-angle lens of internationalization, and also seeking input on shortcomings or the need for updating state insurance regulation.
FIO Director Michael McRaith also said the long-awaited modernization report could be expected “in the near future,” according to those present.
A new FACI committee, formed under FACI Chairperson and Marsh McLennan CEO Brian Duperrealt, was specifically charged with possible changes to U.S. state insurance laws created by the implementation of an international body’s work known as ComFrame.
The Comframe (or, more long-term, hot button international regulatory standards under development) Subcommittee, to be headed by New York State Insurance Superintendent Benjamin Lawsky would look at the potential impact of that work in relation to U.S. insurance laws, according to a FACI meeting review by Sue Stead, head of Nelson Levine de Luca & Hamilton ’s regulatory practice.
ComFrame is the International Association of Insurance Supervisors (IAIS) “Common Framework for the Supervision of Internationally Active Insurance Groups.” ComFrame will codifiy methods of operating group-wide supervision of Internationally Active Insurance Groups (IAIGs) in order to make group-wide supervision more effective and more reflective of actual business practice and establish a comprehensive framework for supervisors to address group-wide activities and risks and also set grounds for better supervisory cooperation.
ComFrame is a centerpiece of U.S./European Union insurance supervision dialogue, which, with Solvency II, has seen its share of U.S. state regulatory mistrust.
McRaith is a member of the IAIS executive committee. The subcommittee will also consider how “group supervision” is defined in ComFrame, and the effects of such changes on the U.S. industry.
In that vein, FIO had begun a U.S./EU dialogue.
At the recent FACI meeting, McRaith said the dialogue is progressing well. A draft document covering seven different topics will be released shortly and will address privacy, group supervision, reinsurance (including collateral requirements), financial reporting, peer review and the oversight of third parties, according to Nelson Levine. Hearings are expected to be held in both the U.S. and in Europe. McRaith reiterated that he hopeful that there would be a resolution on these topics by the end of the year. As Stead wrote, when asked by a FACI member whether the FIO would adopt the views of state insurance regulators with respect to ComFrame, McRaith said it would be “inappropriate” for him to say that.
Of course, not all regulators have the same opinion on ComFrame, but one FACI member, Pennsylvania State Insurance Department Commissioner Michael Consedine, has a department that has been outspoken on state versus international regulatory matters.
At this meeting, Tom Leonardi (the Connecticut Insurance commissioner, who participated in the meeting by phone) challenged McRaith with respect to ComFrame, asking whether the FIO would adopt the views of state insurance regulators with respect to ComFrame, according to a regulatory lawyer present. Consedine followed up, expressing his concern that the FIO and the states could end up diametrically opposed to one another on prudential supervision approaches, but McRaith did not back down, responding that he is “entirely confident” that will not happen and that the FIO and state insurance regulators have the same interest in a system that will be fair and protect the interests of consumers, this person stated.