Congress should exercise strong oversight to ensure that global negotiations on insurance regulation do not become an effort to impose a one-size-fits-all global standard onto the robust U.S. insurance marketplace, the National Association of Mutual Insurance Companies said today.
“The goal of global insurance regulatory talks at the International Association of Insurance Supervisors should be to create a more effective global regulatory environment through coordination and cooperation,” said Jimi Grande, senior vice president of federal and political affairs for NAMIC, “not to simply set and impose a standard without regard to the fundamental differences in regulatory and legal systems across the globe, or to the costs that will ultimately be borne by consumers.”
In testimony submitted to the House Financial Services Subcommittee on Housing and Insurance, NAMIC outlined some of the differences in the insurance marketplaces and regulatory schemes in Europe, Asia, and North America, and how the measures being taken by the IAIS are generally too prescriptive and formulaic. Specifically, NAMIC noted the disregard of the United States’ legal-entity-based regulation, where risk is limited to one company in favor of a more European-style system in which capital is fungible and a supervisor could require its transfer from one legal entity to another.
Additionally, NAMIC cautioned against any move toward imposing a single accounting standard on a global scale, saying such efforts would be disruptive and could create a competitive disadvantage for U.S. insurers.
“A successful global effort would not create unnecessary competitive issues for companies domiciled in one jurisdiction over companies from another, but would instead provide a flexible capital assessment that would recognize and improve understanding of diverse approaches to solvency regulation,” Grande said. “Unfortunately, the IAIS does not seem to be heading in this direction, and the potential market disruptions, while unintended, could be very significant.”