Insurers are preparing for a bold discussion on working out global standards for insurance supervision that have the ability to change the industry and the insurance market in the U.S. once they are put in place.
The proposed global financial regulatory changes of the International Association of Insurance Supervisors (IAIS) go beyond the cooperation and coordination many insurers have sought. The IAIS is holding its annual conference in Washington next week, beginning Sunday, with the nonpublic portion held the first part of the week.
With the G-20’s bank-heavy Financial Stability Board (FSB) offering glimpses of possible future supervision, some in the industry fear that the push for bank-centric, onerous and costly regulations will disrupt the industry’s core processes, creating an uneven trade system and setting up an uncertain arena of players where some are identified by certain criteria as systemically important or globally active (G-SIIs).
State insurance regulation “will be graded” on compliance with new, global standards starting in 2014, said Robert Gordon, senior vice president, policy development & research, Property Casualty Insurers Association of America.
“We don’t want the U.S. to get outfoxed in these discussions so insurers don’t end up with global, bank-centric rules,” Gordon said.
The FSB asked for insurance industry input last week in a first-of-its kind hearing, where it was gathering information on enhanced capital resiliency, rapid resolution of insolvencies and enhanced supervision, highlighting areas of concern.
Some worry that the FSB, and thus the IAIS are focused on loss absorbency, which loosely translates to higher capital requirements for insurers.