EU-US dialogue: Dream of a Common Language still a dream

The panel, from Pennsylvania Insurance Commissioner and NAIC Secretary-Treasurer Michael Consedine to Federal Insurance Office (FIO) Director Michael McRaith to Bernardino, all agreed that the EU-US dialogue, which has been meeting in mostly closed sessions for the past year, is the foundation for increased understanding and compatibility between Europe and the United States

Consedine repeated what he said McRaith had already underscored, namely that, “The way forward continues to be the way forward.” 

Dialogue panelists said that they need to prioritize, and to concentrate on more concrete deliverables.

Bernardino said he thinks Solvency 2 will help with the development of international standards and discussions on solvency and capital. Large insurance and reinsurance company representatives all cheered an international standard, but some worried about what it would look like, if it would be Euro-centric, or capital-rich and rigid, and if it would co-exist with other, secondary or tertiary home country or local standards.

AIG Chief Risk Officer Sid Sankaran said on the panel that AIG would like to have one standard but is not confident about how it would turn out. Others echoed that sentiment.

With regard to the supervisory colleges, before there is a common standard, or even a common language or definition of terms, regulators must decide who is to serve in the colleges and what will happen in times of duress or imminent collapse if one regulator wants to take  funds from another jurisdiction’s better-capitalized entity to shore up the home-state company.

In the freshly-released FIO report, McRaith made clear he wants to be part of the regulatory process and participate in supervisory colleges for large national insurers and internationally active insurers. 

As Nelson Levine de Luca & Hamilton’s Chairman Michael Nelson wrote in analysis, the FIO apparently wants information from those supervisory colleges to assist it in its role as monitor of financial stability for the insurance industry.

The Reinsurance Association of America’s (RAA) general counsel Tracey Laws said she is not totally clear on where the FIO is going to be on this, although a representative of FIO has already sat in the supervisory college of a large offshore reinsurer, ACE Limited, according to a representative of the company.

State regulators seem somewhat torn, while one ex-state regulator private said the move by FIO was “ballsy” considering the specific company information and confidentially concerns.

Another noted that the U.S. Treasury has likely more confidentiality concerns and strictures than the states. 

“I’m not sure if you are within your charter, Mike. I’m somewhat torn by this,” said Johnson to McRaith amid nervous laughter by the panel. 

Connecticut Insurance Commissioner Tom Leonardi, who sits on about 15  supervisory colleges and leads about seven, told McRaith that while EIOPA is a regulator, FIO is not a regulator, and it is regulators who sit on supervisory colleges. 

One federal regulator, Ann Misback, associate director, Division of Banking Supervision and Regulation, for the Federal Reserve Board did not seem to have worked out precise roles in the supervisory college for overseeing the national non-bank systemically important financial institutions (insurers like Prudential Financial and AIG), but did say the Fed was working well with the home states.