Dream of a Common Language is not just a work of poetry by Adrienne Rich. It might be the overriding dream — or nightmare — of the EU-US Dialogue best practices forum and its stakeholders. The EU-US Dialogue, last visited a year ago, is an insurance regulatory project to manage the European Union and the United States insurance regulatory regimes international coordination.
During the National Association of Insurance Commissioners (NAIC) meeting here on a rainy December Saturday morning in Washington, panelists focused on ongoing topics such as confidentiality, and the all-important nexus of insurance company oversight, the supervisory colleges.
Regulators from both sides of the Atlantic appeared to still be grappling with what counts as a common language, although there has been some progress, according to Gabriel Bernardino, chairman of the European Insurance and Occupation Pensions Authority (EIOPA), a regulator.
“We have started to look at a common definition of risk. We have an agreement on how to proceed on this,” Bernardino said.
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George Brady, deputy secretary of the International Association of Insurance Supervisors (IAIS) said that, although he had previously been with the NAIC, he is struggling to understand some of its resistance to a common language on international standards.
This could refer to everything from the proposed IAIS capital standards under the ComFrame project for international active insurance groups — not to mention the increased loss absorbency and looming backstop capital requirements for global systemically important insurers (G-SIIs) requirements — to Europe’s Solvency 2, whose unified guidelines are to apply to European insurers and reinsurers beginning January 2016. Higher loss absorbency capital requirements for G-SIIs will be developed by the end of 2015 and are to be implemented by January 2019.
Steve Johnson, the Pennsylvania Insurance Department financial regulator, pointed to the triumvirate of governance, risk management and capital management. “THAT is what we are focused on; that is the Common Language … I don’t need ComFrame to tell me that,” Johnson said.
“It has been very effective — and it’s worked,” Johnson said.
Bernardino, discussing supervisory colleges where the lead state or country regulator meets with regulators from other jurisdictions where the company does business to look at the whole enterprise, said he wants the language to be clear. “We do not want even more languages to discuss,” he said
He also said that Solvency 2 raises the bar in terms of risk-based supervision.
NAIC CEO Sen. Ben Nelson said that it always worries him when someone alludes to a silver bullet to describe what “we are looking for.”
“If there are best practices,” Nelson said, “then logically there are worst practices.”
He mentioned the many components of the international insurance regulatory scene, from the Financial Stability Board (FSB) to the IAIS to ComFrame. “It is a recipe of ingredients,” he said, “[but] what will all this mixture produce?”
Like many, Nelson said he is not sure yet, but wants to keep the dialogue going in the appropriate direction.