Federal Reserve Chairman Ben Bernanke (AP Photo/Dennis Cook)

In a speech last week, Federal Reserve Chairman Ben Bernanke suggested that global insurance system — and financial — oversight is a priority of the United States.

“…No country can effectively implement the financial reforms I have described in isolation,” Bernanke said, immediately after discussing what he terms the “shadow banking” system, to include insurers. 

In his speech on Jan. 3, he noted that oversight of the shadow banking system also has been strengthened and used recent actions on insurers as examples.

Bernanke, who is stepping down later this month to be replaced by the just-confirmed Janet Yellen, referenced the nonbank systemically important financial institutions (SIFI) designated this year by the Financial Stability Oversight Council (FSOC). These include U.S. insurers Prudential Financial and AIG, and GE Capital.

Bernanke also mentioned other reforms underway, such as those in the tri-party repo market, but with regard to the internationalization of reform, he mentioned international bodies that are overseeing major insurance policy globally. 

These bodies are the Basel Committee and the G-20’s Financial Stability Board (FSB), which is directing much of the policy direction for the Basel-based International Association of Insurance Supervisors (IAIS.)

The IAIS is tasked with now developing an international capital standard to apply to internationally active insurance groups (IAIG), as well as higher loss absorbency standards for those insurers and reinsurers it deems systemically important. 

The IAIS was instructed in a broad insurance supervisory policy directive by the G-20’s Financial Stability Board (FSB) to develop “a work plan to develop a comprehensive, group-wide supervisory and regulatory framework for Internationally Active Insurance Groups (IAIGs), including a quantitative capital standard” by the end of the year.

Starting this year, the IAIS will also develop backstop capital requirements for global systemically important insurers (G-SIIs), whose designees include AIG, MetLife and Prudential Financial domestically; Axa, Allianz, Aviva, Prudential plc in the U.K.; Ping and Assicurazioni Generali S.p.A. The backstop capital requirements will apply to the G-SIIs by year-end 2014.

Bernanke, after noting that countries cannot go it alone in such endeavors, made it clear the U.S. is fully behind these efforts. He added that “the good news is that similar reforms are being pursued throughout the world, with the full support of the United States and with international bodies such as the Basel Committee and the Financial Stability Board providing coordination.”

The speech was made at the American Economic Association (AEA) annual meeting in Philadelphia.

The U.S. agencies on the FSB are the Fed, the Treasury Department and the Securities and Exchange Commission. This group represents U.S. policy but not always or necessarily that of the state regulators.

The National Association of Insurance Commissioners (NAIC) to that end has asked Treasury Sec. Jacob Lew in a meeting last month to have a voice in the FSB. While they won’t be joining the FSB anytime soon, the issue was put on treasury’s radar at the meeting.