If one word could sum up the discussions at the InternationalAssociation of Insurance Supervisors (IAIS) Annual Conference inWashington, D.C. last month, it would be “Vision?”

In this instance, the question mark is important. Many of theIAIS members and observers participating in D.C. recognized thatthis year's conference occurred at a critical time for theinternational regulatory association. They also recognized that aclear vision of the direction of insurance supervision will benecessary to guide the activities and ambitions of the IAIS in theyears to come.

Developing this vision is not a straightforward challenge forthe IAIS, and over the course of the week the association grappledwith many difficult questions. While the IAIS is clearly unified asan organization, its various members and observers nonetheless havedifferent perspectives and approaches—or, in the words of NAIC CEOTerri Vaughan, “regulatory philosophies.”

The question of a global capital standard was one of theclearest points of disagreement. Given its application withinEurope's proposed Solvency II laws, this objective isunderstandably supported by E.U. regulators for its contribution toa level playing field for groups operating internationally. It alsois reasonable to expect that consistent and comparable capitalacross territories would facilitate supervision at amacro-prudential level. However, while it supports the need toassess the financial health of groups, the NAIC is strongly opposedto a global capital standard because of perceived disadvantages,which include its potential to shift authority over legal entitycapital (and therefore state or national policyholder protection)from local regulators to a group supervisor. Moreover, the NAICsees the lack of a globally accepted basis for the valuation ofinsurance contracts as a further complication to developing aninternational group capital standard.

This question is closely linked to the status of ComFrame, whichalso was debated extensively at the conference. Industryrepresentatives from many jurisdictions have asked for ComFrame tobe principles-based, and regulators generally have not disputed theneed for the framework to be flexible. However, they were clearthat high-level principles alone will be insufficient to achieveComFrame's intended purpose. Striking the right balance betweenprinciples, rules and guidelines will continue to be a challenge asComFrame is further developed and tested.

On the final day of the conference, there was a public hearingon the reports of the seven technical committees that have beencomparing the E.U. and U.S. insurance regulatory regimes. Suggestedtechnical improvements notwithstanding, there was widespread praiseof the reports that the technical committees produced. As we willdiscuss further in an upcoming whitepaper, these reports representan important crossroads on the path toward international alignmentand cooperation, and the dialogue project Steering Committee willneed to act decisively but carefully as it moves forward.

In his closing address to the conference, IAIS Chairman PeterBraumüller recognized the many areas of work in which theIAIS is engaged and asked attendees if it is really necessary forthe IAIS to pursue all these workstreams with such urgency.Braumüller answered his rhetorical question with a clear“yes”—and most attendees likely agreed. The IAIS has the potentialto profoundly influence insurance supervision over the comingyears. However, many difficult questions remain about how totranslate dialogue into tangible policy changes that achieve theglobal cooperation and alignment for which so many are aiming.

Henry Jupe contributed to this blog.