Insurers are preparing for a discussion on working out globalstandards for insurance supervision that, once in place, have theability to change the industry and the insurance market in theU.S. 

The proposed global financial-regulatory changes ofInternational Association of Insurance Supervisors (IAIS) go beyondthe cooperation and coordination many insurers have sought. TheIAIS is holding its annual conference in Washington next week,beginning Sunday, with the nonpublic portion held the first part ofthe week.

With the G-20's bank-heavy Financial Stability Board(FSB) offering glimpses of a future supervision, somein the industry fear that the push for bank-centric, onerous andcostly regulations on the insurance industry will disrupt coreprocesses and create an uneven trade system, setting up anuncertain arena of players where some are identified by certaincriteria as systemically important or globally active.

State insurance regulation "will be graded" on compliance withnew, global standards starting in 2014, says Robert Gordon, seniorvice president, policy development & research, PropertyCasualty Insurers Association of America(PCI).   

"We don't want the U.S. to get outfoxed in thesediscussions so insurers end up with global, bank-centric rules,"Gordon said.

FSB asked for insurance-industry input last week in afirst-of-its-kind hearing, where the FSB was gathering informationon enhanced capital resiliency, rapid resolution of insolvenciesand enhanced supervision.

Some worry that FSB, and thus the IAIS are focused on lossabsorbency, which loosely translates to higher capital requirementsfor large insurers — in terms of size, leverage andinterconnectedness — as well as smaller but internationally activeplayers.

PCI emphasized during a conference call today withreporters the importance of working with the IAIS to reinin what it sees as some of the overreaches of ComFrame [CommonFramework for the Supervision of Internationally Active InsuranceGroups] and other IAIS projects. 

"What's troubling in recent years is global standards that areset by unelected, unaccountable bodies," says David Sampson,President and CEO of PCI.

"What is at stake for U.S. marketplace if wego blindly down this road [with rules] that are not suitedfor U.S. marketplace—I think this is very troubling,"Sampson continues. "This is a highly competitive marketplace." Hesays if layers of regulations are imposed — international uponfederal upon state — then regulatory-induced, rather thanmarket-driven, consolidation of the insurance industry would takeplace.

PCI's team says it is going to try and refocus the discussion onregulatory cooperation rather than on new mandates foras-yet-undefined capital standards and regulations that aresometimes at odds with U.S. corporate governanceprocedures.