State insurance regulators’ own systemic risk team hopes to improve U.S. care for sick, dying and dead U.S. insurers, to show that insurance regulators are doing their part to manage systemic risk.
The Financial Stability Task Force, a top-level arm of the National Association of Insurance Commissioners, has asked another arm the Receivership and Insolvency Task Force (RITF), to look at the current rules and procedures for tending to ailing insurers.
Kristine Maurer, the New Jersey state insurance regulator who heads the RITF team, began organizing the review earlier this week, at the NAIC’s spring national meeting in Milwaukee.
Regulators refer to helping a troubled insurer recover as “recovery,” and shutting down a troubled insurer as “resolution.”
At the spring meeting, Maurer asked for volunteers to help update NAIC recovery and resolution laws, procedures, and handbooks, to reflect how regulators in Washington and in other countries do things today.
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The volunteers will also look for conflicts between state and federal laws and the U.S. Treasury Department’s ideas about “orderly liquidation authority.” “Orderly liquidation authority” could let the Treasury Department take charge of a troubled insurer if the department thought state insurance regulators were failing to do enough to protect the financial system.
The NAIC has made improving the Financial Stability Task Force part of a new strategic plan.
The NAIC is a group for insurance regulators. It cannot set state insurance laws and regulations itself, but states often start with NAIC “models,” or official examples, when developing their own laws and regulations.
The NAIC began a wave of solvency model updates after the Great Recession.
Officials at the Financial Stability Oversight Council (FSOC), the International Association of Insurance Supervisors and the Financial Stability Board began systemic risk management initiatives of their own around the same time.
FSOC helps federal regulators track potential threats to the U.S. financial system.
The Financial Stability Board is the Basel, Switzerland-based equivalent of FSOC for Europe.
The International Association of Insurance Commissioners is a Basel-based group for the world’s insurance regulators.
The FSB and IAIS have tried to encourage the United States to adopt international solvency standards.
FSOC officials have questioned how well state insurance regulators can identify and handle serious problems at large, multinational insurers.
The NAIC says in its strategic plan that it wants to respond to the issues raised by FSOC, and to expand its “macroprudential surveillance” capabilities.
The NAIC’s Financial Stability Task Force is supposed to develop a report on the risks facing the U.S. insurance industry, and it’s supposed to use data, metrics and reports to “better leverage the NAIC’s macroprudential surveillance capabilities with federal and international peers.”
Maurer wrote, in a memo included in a RITF spring meeting document packet, that the team working on the recovery and resolution review will ask for comments from interested parties, including guaranty associations, insurer groups, individual insurers and consumer representatives
The National Organization of Life and Health Insurance Guaranty Associations (NOLHGA) and the National Conference of Insurance Guaranty Funds (NCIGF) have already started commenting.
Peter Gallanis, the president of NOLHGA, and Roger Schmelzer, the president of NCIGF, have written to say that the RITF team should start off looking for “best practices” here at home.
“Because our national, state-based receivership and guaranty system has the broadest and deepest resolution experience in the world, as well as the most developed laws, processes, and policyholder protection systems, many of those standards and practices may derive from U.S. experience,” Gallanis and Schmelzer write, in a letter included in the RITF document packet.
Lawyers at DLA Piper have written in a recent review of world insurance regulatory activity that life insurers have been warmer toward the NAIC’s macroprudential project than the property-casualty groups have been.
Property-casualty groups have been especially cool toward the NAIC’s review of recovery and resolution issues, DLA Piper lawyers write.
CORRECTION: Kristine Maurer’s title was described incorrectly in a previous version of this article. She’s s assistant director of insurance at the New Jersey Department of Banking and Insurance.
— Read Insurers Hope to Keep FDIC Resolution Plan Notices Simple on ThinkAdvisor.