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National Association of Insurance Commissioners (NAIC) President and Superintendent of the Maine Bureau of Insurance Eric A. Cioppa recently testified before the US Senate Committee on Banking, Housing, and Urban Affairs at a hearing titled Developments in Global Insurance Regulatory and Supervisory Forums.
The hearing focused on US views about the development of global standards for insurance regulators.
Mr. Cioppa’s testimony outlined concerns of state insurance regulators pertaining to the following two areas currently being pursued by the International Association of Insurance Supervisors (IAIS).
The development of an insurance capital standard (ICS)
A holistic framework for systemic risk in the insurance sector
“The NAIC has long contributed to development of international insurance standards and adopted those that make sense for our market, but we have significant concerns with the direction and construction of the ICS,” Mr. Cioppa testified. “The ICS remains not only technically flawed but also contrary to key policy initiatives in the United States, such as retirement security, long-term care, infrastructure investment, and disaster resiliency.”
Mr. Cioppa indicated that the NAIC remains committed to international standard-setting, but he cautioned that presently the US delegation views the draft ICS as inherently problematic and is pursuing an aggregation method as an alternative that is not only comparable but superior to the ICS in several respects.
“States are moving forward with a group capital calculation, and the Fed is moving forward with a building block approach, both of which are compatible with the aggregation method,” added Mr. Cioppa. “We believe this is the best path forward for US policyholders and market participants while remaining consistent with the underlying purpose of the ICS.”
The International Capital Standard Must Recognize US Insurance System
The American Property Casualty Insurance Association (APCIA), issued the following statement ahead of the hearing.
The International Association of Insurance Supervisors (IAIS), against objections by Team USA (representatives from the National Association of Insurance Commissioners, the Federal Reserve Board, and the Federal Insurance Office of the US Department of Treasury), is scheduled to adopt a proposed global insurance capital standard at its annual conference in mid-November. In its current form, the ICS is unsuitable for the US regulatory system and would have a harmful impact on US insurance companies, consumers, and the marketplace. The ICS would be instituted for a 5-year monitoring period and is expected to be adopted by IAIS member countries within their respective jurisdictions.
“Although the existing capital standards of the US insurance regulatory system have served the United States well, the IAIS continues to demand global approval of its proposed ICS, which is unworkable in the US insurance regulatory system and would undermine market growth and stability. It is imperative that alternatives, such as the aggregation-based group capital assessment that US regulators have developed, be recognized as a better fit for the US insurance market,” said David A. Sampson, president and CEO of the APCIA.