Congressman Presses McRaith, FIO on Key IAIS Initiatives

Congress is taking one of its first steps toward oversight of Federal Insurance Office (FIO) activities by questioning the FIO's stance on key international insurance regulatory proposals. 

Chairman of the House Financial Services Subcommittee on Housing and Insurance, Rep. Randy Neugebauer, told FIO Director Michael McRaith that current international standard-setting proposals could impose unnecessary costs on insurance consumers and hurt the competitive U.S. marketplace. 

Specifically, Neugebauer wrote to McRaith, who also heads the influential technical committee of the International Association of Insurance Supervisors (IAIS), stating that two major IAIS initiatives—ComFrame and standards for systemically risky insurers—are, as currently crafted, bad for the U.S. economy and consumers.

Neugebauer’s letter, dated March 26, reflects the concern of many in the U.S. state regulatory and industry communities. 

The current draft of ComFrame, says Neugebauer, “includes an onerous group-wide capital-assessment process that would require U.S.-based international insurers to hold more capital on a discriminatory basis than similarly-situated insurance groups that operate entirely within the U.S. or other major jurisdictions.”

ComFrame does not have its own legal authority, nor does the IAIS, which is based in Basel, but there will be enormous pressure on the U.S. to implement it.

Neugebauer wrote that he will not welcome a "one-size-fits-all" regime to be placed over U.S. insurance companies solely because they are internationally active, and he wants McRaith to stand up to such an imposition.

The Congressman also expressed concern regarding IAIS’ proposals to name U.S. insurers as global systemically important insurers, or G-SIIs.

The 2009-established Financial Standards Board (FSB), created under the G-20, is expected to have final say by the end of June on a current crop of proposed G-SIIs.

Neugebauer expressed concern that G-SIIs would be subject to stricter supervision and higher capital requirements in various areas deemed risky. He also wrote that G-SIIs would be subject to consolidated supervision by the Federal Reserve Board, but it is not clear if this is true. 

Statutory changes would be required under U.S. laws to implement some of the G-SII provisions. The IAIS does not make the Fed a de facto regulator for designated companies, nor can it without legislation.

Also, according to recent press reports, the IAIS does not plan to require G-SIIs to hold extra capital, other than for specific non-traditional insurance business, writes analyst Sean Dargan of Macquarie Capital (USA) Inc. However, variable annuities may be considered to be a non-traditional line of business, many worry.

Dargan believes the Federal Reserve will take its cues around U.S. non-bank systemically important financial institution (SIFI) capital requirements from the IAIS.

He adds that he does not think there will not be material changes to capital requirements for MetLife and Prudential, two companies Dargan sees as potential G-SIIs. 

Neugebauer asked the FIO to work with members of the Treasury-led Financial Stability Oversight Council (FSOC)—which can and likely will designate nonbank SIFIs, and the U.S. members of the FSB—"to reject IAIS recommendations that do not comport with U.S. law and regulation."

Comments

Resource Center

View All »

Complimentary White Paper: The Compression of Workplace Time

How brokers and carriers respond to the compression of workplace time will create significant competitive...

The Changing Insurance Consumer: 6 Ways to Create Profitable Relationships

Today’s mobile and web-savvy consumers have new expectations when it comes to interacting with your...

Contractors General Liability Coverage 102

What is a prior work exclusion? Which option is right for my client? Why do...

Sign up today to get a 50% matching credit -...

Insurance marketing sometimes seems like it's a game of swings and misses, but we're here...

Guide: 5 Steps to Selling Cyber

Cyber risk and data security is on the agenda of every business owner and executive....

Citation Correlation

Do rigger and signalperson qualifications correlate with the cause of crane and rigging accidents? ...

Complete Guide to Electronic Signatures in Property & Casualty Insurance...

In property and casualty insurance, closing new business quickly is key. Learn how to leverage...

INSTANT ACCESS: Complimentary Sales Closer Questionnaires

Help property owners or managers compare your commercial residential property insurance coverage vs. the competition....

Determining Vacant Property Perils and Valuations

Are your clients fully covered for Vacant Properties? In this economic climate, your insureds may...

Risk Management for Law Firms

This package of 3 concise risk management articles offers straightforward content and practical suggestions law...

PropertyCasualty360 Daily eNews

Get P&C insurance news to stay ahead of the competition in one concise format - FREE. Sign Up Now!

Advertisement. Closing in 15 seconds.