The Changing World of International Insurance Regulation

Transcription

1 The Changing World of International Insurance Regulation PCI Northeast General Counsel Seminar September 2016 David F. Snyder, Vice President, International Policy 1

2 Changing Architecture of Insurance Regulation At the top, G-20 establishes the Financial Stability Board (FSB) with authority to coordinate international regulation of financial services, including insurance International Association of Insurance Supervisors (IAIS) issues international standards for all insurance companies--insurance Core Principles (ICPs) including financial, governance and market conduct regulation and is working on more stringent standards for large international insurers Internationally Active Insurance Groups (IAIGs) and Global Systemically Important Insurers (G-SIIs) Key Point: None of this is legally binding but has substantial impact nonetheless 2

3 Changing Substance of Insurance Regulation Current version of ICPs heavily influenced by Solvency II including its focus on group level supervision and the role of capital Ever present danger of the more stringent international standards intended for certain categories of companies to be broadly applied, although proportionality principle is in place Governance standards can be intrusive, including fit and proper regulatory approval authority for officers and directors Danger of social issue disclosure mandates Remuneration regulation so far high level but potential for more prescription On the good side, so far, ICPs allow for different corporate structures so long as essential functions are being performed 3

4 Recent International Governance Developments OECD/IAIS governance standards for insurers published for consultation increased focus on remuneration and social, environmental and governance disclosures FSB published for consultation its standards for financial entities and is engaging in peer review and possible updating PCI led global industry response to both emphasizing the importance of keeping the standards high level, recognizing different jurisdictional approaches and defining fairness as compliance with applicable legal standards FSB is hosting a one day invitation only session in NYC on September 30 and PCI is invited due to its global industry leadership 4

5 Changing Substance of Insurance Regulation Capital standards pressure for an international standard with heavy requirements and mark to market accounting, but push back, notably the Fed s recent comments and actions--delays have resulted Market conduct slower to develop but pressure is on for more detailed work treating customers fairly which may be different from compliance with legal standards Cyber security IAIS released its first paper Technology Organization for Economic Cooperation and Development (OECD), which discusses high level insurance policy issues, held roundtable in June on technology and its uses in insurance not clear what path this will take but will continue 5

6 Reactions Paraphrasing Saul Alinsky: The action is in the reaction. NAIC is fighting but also embedding some of these developments in its models laws, including governance reporting, ORSA and group capital considerations Congress has engaged in significant oversight, including hearings and letters and is now working on bipartisan legislation in the House and Senate to assure consensus between federal and state agencies in international insurance regulatory discussions and to provide more accountability and transparency Team USA composed of NAIC, Fed and Treasury s FIO working? PCI continues to work with the NAIC, state regulators and legislators, Congress, the Fed, Treasury s FIO, industry and international regulators on outcomes consistent with our proven effective U.S. system 6

7 Trade Agreements Foreign barriers to our members often occur through regulatory action Barriers to trade in insurance are increasing against foreign reinsurers and data localization mandates in particular New trade agreements are important to provide a tool to resist such developments, although regulators are still free to regulate the prudential carve out Currently pending trade agreements are caught up in U.S. internal politics and global strategic disagreements PCI active in advising and advocating in connection with trade agreements as another avenue to achieve regulatory balance 7

8 Conclusion International developments are changing the architecture and substance of insurance regulation Insurance regulation is now a game of three dimensional chess Critical need for engagement at all levels to protect our companies and consumers, our competitive insurance markets and our regulatory system PCI active on your behalf in all forums urging regulation that supports competition, innovation and open markets 8