NU Online News Service, June 30, 1:35 p.m. EDT
BERMUDA–Group-wide supervision means factoring all risks of a group into regulations, according to an executive at the Bermuda Monetary Authority who said the 2008 troubles at American International Group has "become a template of what a supervisor must do to protect policyholders" and others.
Speaking at the Bermuda Captive Conference held here, Jeremy Cox, CEO of the Bermuda Monetary Authority, said that during a recent conference in Bahrain "the AIG issue was discussed widely."
He said group-wide supervision was not achieved with AIG prior to the company's troubles, and added that Bermuda has responded with a new bill regarding group supervision powers to make sure a similar situation does not arise in Bermuda.
His comments came as speakers praised the communication between the private sector and regulators in Bermuda.
Brian Duperreault, president and chief executive officer of Marsh, observed that the insurance industry overall has fared well because of good management and good regulation. "Bermuda has both," he said.
He said that in many jurisdictions, regulators have "no contact with the market. Here there is constant dialogue, constant interaction."
Paula A. Cox, deputy premier and minister of finance, also mentioned the dialogue between business and regulators and said that interaction has led to effective regulation in Bermuda.
But she noted Bermuda "must continue to raise the bar."
Mr. Duperreault said there is "no question about the quality and integrity in Bermuda. This is why so many companies have put their capital here–it's the best place in the world."
Commenting on the prolonged soft market, Mr. Duperreault said that with interest rates low, "you would think something has to give on the rate side, since we can't make it on the investment side."
He said, "My brain says rates should go up, but my heart says that won't happen. There's too much capacity."
What might cause rates to rise? "It would have to be pretty significant," he said, adding that such a catastrophe most likely would affect property rates in localized areas, rather than having a large impact on the market overall. "So I think it might be a long time," he concluded.
He added that while the industry has seen some major catastrophes, including Hurricane Ike and others, "the industry remains strong."
While regulators push for greater capital requirements, Mr. Duperrault said such requirements are not needed.
"We already passed the test," he said.
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