International regulatory and industry executive panelists discussing the International Association of Insurance Supervisors (IAIS)’s ComFrame (Common Framework) global supervision diverged a great deal on approaches to supervision, what it should look like, who should supervise, and a timetable for implementation.
There are still very distinct views separating the European approach and the U.S. approach on ComFrame said an executive at a large multinational life insurer after the panel.
Other observers noted a lack of cohesion on many elements within Europe, while the U.S. policy remains unclear—the Federal Insurance Office (FIO) director, Michael McRaith, is now chair of the IAIS influential Technical Committee. McRaith mediated the ComFrame discussion at the annual conference in Washington today.
“ComFrame has drifted apart and everybody recognizes that,” said NAIC President and Florida Insurance Commissioner Kevin McCarty, who spoke earlier but was not on the panel.
Connecticut Insurance Commissioner Tom Leonardi was adamant that capital and some other quantitative standards should not be imposed globally and supersede local regulation, which McCarty has said before.
“What if we do it and we get it wrong?” McCarty said in a brief interview afterward—that in itself would be systemically risky.
Leonardi, who sits on nine supervisory colleges, said that “to have a lead regulator that has ultra powers would be detrimental.” Leonardi also said the process should not create an unlevel playing field and have unintended consequences with the IAIGs versus all other entities.
Leonardi said a successful model was the NAIC model holding company act which Connecticut passed in June, which gives the state insurance regulator power to oversee all parts of the group, to participate in supervisory colleges, and to even ask for the financials of any part of the insurer, even if it’s “a railroad company in South Africa” or a company in an unrelated business in Japan and allows for confidentiality of data, which the state financial exams law do not. The model law also allows the regulator to charge the expenses back to the insurer.
Gabriel Bernardino of the European Insurance and Occupational Pensions Authority (EIOPA) emphasized that a common language was needed but cautioned “we need to be clear on what we mean by a common language.”
Bernardino, who said group supervision in Europe has a long history with supervisory colleges, said it was important to make sure “we are capturing the real risks at the group level.”
In response to a question posed by McRaith to panelists on how far should ComFrame push on developing global capital standards, Bernardino said, “here we have an opportunity. We should have a global standard for insurers’ group supervision. It needs to be quantitative and qualitative … with a clear role for the group supervisor. I believe it needs a group capital requirement. Can we achieve it tomorrow? No.”