U.S. Insurers Concerned With Global Regulators' Direction

Two property and casualty insurance trade groups contend proposed international supervisory standards must be rethought because it would impose an unjustified additional layer of regulatory restrictions on insurance companies who operate globally.

In letters to the International Association of Insurance Supervisors, insurer associations the Property Casualty Insurers Association of America and American Insurance Association were critical of the ComFrame proposal.

ComFrame (Common Framework for the Supervision of Internationally Active Insurance Groups) is an international group supervision project led by the IAIS that is intended to be a "common framework" for the supervision of internationally active insurance groups. It is intended to provide guidance and principles to aid supervisors in different countries to coordinate, cooperate, and communicate with one another regarding the oversight of such groups.

In the letter, Stephen Broadie, PCI's vice president, financial policy, says an "immediate, fundamental change in direction and focus" is required.

"We believe that ComFrame's primary objectives should be to increase communication and coordination between group supervisors and to increase the efficiency and effectiveness of supervision of global insurers, including increased coordination through a group-wide supervisor."

Broadie adds that, "Achieving these objectives would address the most significant shortfalls in global group-wide supervision that were identified during the global financial crisis, as well as provide lasting benefits for supervisors, insurers and policyholders."

J. Stephen Zielezienski, AIA senior vice president and general counsel says in the association's letter that it is concerned that the current ComFrame draft includes prescriptive standards for internationally active insurance groups (IAIGs) that can be interpreted as "setting forth a new prudential regulatory regime as well as capital standards requirements which could have adverse consequences for insurers."  

"AIA respectfully urges the IAIS to align ComFrame with the goals of regulatory efficiency and effectiveness," says Zielezienski.

He went on to say that the "goal for ComFrame should be to promote private market expansion rather than establishing a new prudential regulatory regime that is both unnecessary and counterproductive."

He suggests a staged approach for ComFrame that first focuses on supervisory responsibilities and coordination and brings "practical experience to bear to help inform supervision and make it both efficient and effective."

In the PCI letter, Broadie asks the IAIS "to develop a more collegial and collaborative method to develop ComFrame."

"While parts of the ComFrame process have become more open, we urge an even more open process in the future," Broadie says.

Broadie suggests the recreation of a working group or committees that would do its work in open sessions.

Besides AIA and PCI the National Association of Insurance Commissioners sent a letter asking for more clarity.

A consortium of international insurance associations, including the American Council of Life Insurers, the American Insurance Association and the Reinsurance Association of America, along with insurers Liberty Mutual and ACE, expressed serious misgivings about the ComFrame proposals.