NU Online News Service, April 11, 2:47 p.m. EDT
U.S. regulators are busy laying the foundation for modernizing solvency standards aimed at better understanding a carrier's ability to withstand the stress of insured losses and making that reporting globally acceptable, experts say.
During a webinar sponsored by the consulting firm PricewaterhouseCoopers, Christina Urias, director of the Arizona Dept. of Insurance and chairwoman of the National Association of Insurance Commissioners solvency implementation task force, discussed where the task force's work stands after the association's recent meeting in Austin, Texas.
Urias points out that the NAIC task force is still researching and developing U.S. modernization standards but is hopeful that the task force's job will be completed on some of the issues by the end of this year or early next.
In her discussion with Thomas Sullivan, a principal with PricewaterhouseCoopers's financial services regulatory practice, and Maryellen Coggins, a director with PricewaterhouseCoopers, Urias says the association plans to introduce a U.S. Own Risk Solvency Statement (ORSA) that will examine insurer enterprise-risk-management practices and a carrier's financial solvency under stress situations.
Urias says the modernization of the regulations is aimed at providing "additional regulatory tools within our toolbox to enhance our ability to correctly supervise the companies that are doing business in our state."
While the aim is to provide a measure that is acceptable for international standards, Urias notes that "it is another way to look at how these companies are operating and get a handle on their risk-management processes."
It will also enable regulators to look forward at risk instead of looking backward when they try to determine what caused a failure, Urias says.
The task force is also examining the development of a Supervisory College that would allow a single regulator to call a group of other regulators together, both domestically and internationally. The college would exchange information about a single carrier or group of carriers. One hurdle to overcome is the duplication of information since carriers will bear the cost of providing information to the Supervisory College. To avoid duplicate reporting the development of ORSA will be essential, she advises.
Other issues touched on include modernization of the task force's examination of the need for risk-based capital and determination of whether an insurer needs to develop a safety level or not; reinsurance reform where at least three states have moved ahead to reduce capital requirements for reinsures; and accounting principles that will need to be moved to international standards for large insurers.
The accounting standards are a "work in progress," Urias notes.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.