NU Online News Service, Aug. 13, 3:04 p.m. EST
ATLANTA—Globalization has reached the insurance industry, making it increasingly important for regulators from around the world to communicate with one another to preserve markets and protect consumers, says the chairman of the International Association of Insurance Supervisors.
Addressing attendees of the National Association of Insurance Commissioners meeting here on Saturday, Peter Braumüller, chairman of the IAIS executive committee and managing director of the Austrian Financial Market Authority, says that while each nation my use different tools to regulate insurance markets, they all have the same goal.
“In the end, our job is to provide fair, open, secure and stable markets for the benefit of policyholders,” says Braumüller.
This simple mission, he notes, becomes complicated because “insurance groups come in so many shapes and sizes.”
In an environment where insurance contracts are increasingly becoming more interconnected with alien insurers, he says, regulators must “interact and cooperate more extensively.”
Underscoring this global interconnection, Braumüller cited a McKinsey study that found 33 percent of new commercial insurance business is written “outside [regulators] jurisdiction,” increasing “the need for dialogue and communication.”
“What we need is effective cross-border communication and we need to work together,” says Braumüller.
However, he says, these discussions need to go beyond insurance.
“When we speak about group supervision, we are speaking about ensuring supervisors are looking beyond the insurance entity and are looking at the group’s business,” says Braumüller, noting how some insurers, while their insurance business was secure, faced dire financial “contagion” outside of their core business affecting the health of the company during the recent economic crisis.
The willingness to share information about risk in the group, Braumüller went on to say, reflects the objectives of all insurance regulators, to pursue effective supervision while also seeking to “reap the benefits of greater efficiency.”
In his opening remarks, Kevin M. McCarty, commissioner of insurance for the State of Florida and president of the NAIC, says that the association’s members traditionally meet to discuss the regulatory framework of the U.S. insurance industry, “Today, our insurance world is growing more and more global in nature. We have to look beyond our borders to develop relationships, much like we have developed relationships with the leadership and participation with the International Association of Insurance Supervisors.”
Recognizing the need for these discussions, McCarty says the NAIC will be hosting the IAIS annual conference this fall in Washington, D.C., that will include 190 jurisdictions from around the world.
Correction: The study Braumüller cited was a McKinsey study not an IAIS study on commercial business.