This year is the second full year since adoption of the revised ICPs, with many of the world’s insurance regulators now putting pen to paper and proposing and implementing wide-ranging reform packages.
In general terms, European insurers continue to invest in Solvency II, where significant prudential change and consumer protection reforms continue. For many, however, the Solvency II delays mean this is at a slower pace than before.
In the US, where the National Association of Insurance Commissioners (NAIC) has responded to global developments, insurers are beginning to ascertain the impact of enhanced enterprise risk management requirements from 2015 onwards.
In Asia, prudential issues such as enhanced capital frameworks and group supervision, combined with a greater regulatory focus on distribution, continue to present insurers with fresh challenges.
Importantly, supervisors in Latin America, the Middle East, Africa and Russia are also now starting to examine how they introduce the ICP requirements.
Issues and outcomes of the key EU-US dialogue
Essentially an annual dialogue between EU and US insurance regulators, the last IAIS conference – held in October 2012 – included a special session to compare EU and US regulatory regimes.
Significantly, this marked the first time both sets of supervisors have formally come together to discuss supervisory issues, whether further convergence could be achieved and the extent of the current differences.
This dialogue formally resulted in a paper comparing the two insurance regulatory regimes – including aspects that are expected to be part of Solvency II in the EU with the US regime.
A group steering committee agreed upon seven topics considered of fundamental importance to a sound regulatory regime and to the protection of policyholders and financial stability.
- Professional secrecy and confidentiality
- Group supervision
- Solvency and capital requirements
- Reinsurance and collateral requirements
- Supervisory reporting, data collection and analysis
- Supervisory peer reviews
- Independent third party review and supervisory on-site inspection
Implications for insurers
- The issue of equivalency remains a real concern to the industry.
- The development of a US ORSA, which essentially aims to achieve the same outcomes as the European ORSA, should help insurers active in both markets streamline risk management operations, reporting requirements and governance arrangements.
- Insurers should continue their involvement in efforts to develop the IAIS’s ComFrame proposals. Ongoing bespoke regulatory requirements from the two biggest global markets invariably cost all participants, particularly policyholders.