The National Association of Insurance Commissioners (NAIC) is advocating for more flexibility for its regulated U.S. insurers to operate both subsidiaries and branches in foreign countries without international supervision favoring the former over the latter.
The NAIC is concerned, for example, that the international regulatory community has stated that the lack of a board of directors at the branch level may limit the host supervisor’s ability to manage governance arrangements effectively.
The International Association of Insurance Supervisors (IAIS) recently released an issues paper, Supervision of Cross-border Operations Through Branches, and although the industry feels it is much milder than earlier drafts, both the NAIC and industry still want the paper to reflect a more balanced, flexible approach so branches aren’t discredited.
“Although it is true that lack of a board at the branch level can hinder a supervisor’s ability to supervise governance, most governance is driven from the ultimate controlling party. Therefore, supervisors can also be limited regarding governance at the legal entity [subsidiary],” the NAIC said in comments addressing the concern about adequate supervision of branches.
“We think the current version of the paper has been improved and we hope it is improved further; we will see when the final draft comes out,” said Connecticut Insurance Commissioner Tom Leonardi on a conference call today.
Pennsylvania Insurance Commissioner Michael F. Consedine said that there have been great improvements since the original anti-branch bias in the first drafts.
Consedine called the matter “a very significant issue,” and said it is something that European counterparts might want to leverage to gain some “fairly significant operational changes” for some of their own companies.