Do you have Solvency II on your mind? I didn't think so. There are more than a few among us wondering what European insurance regulations have to do with doing business in the United States. But the fact is, if your company is not part of any international corporation, Solvency II isn't that big a deal for you.
If your entity is a business unit of an international insurer—and the globalization of insurance is seeing to that—you really do have to consider the ramifications, even if your particular company doesn't sell policies beyond the U.S. borders.
Many U.S. insurers are part of multinational insurance groups, some of which have their headquarters outside the U.S. A U.S. insurer also may be part of a large insurance group domiciled in the U.S. that has affiliates in Europe or elsewhere abroad.
Lawrence H. Mirel, a partner in the insurance regulation practice at insurance law firm Nelson Levine de Luca & Hamilton, points out the Europeans regulators are determined to ensure solvency for all the members of the insurance group by setting standards of solvency for all members of the group.
But if a member of a large international insurance group is based in the U.S., the state regulator will be knocking on the door to regulate that subsidiary and will not defer to the European regulators, adds Mirel. In essence, the Europeans are pursuing a top-down regulatory approach, while in the U.S. the regulatory system works from the bottom up.
The good news—unless you are among those that believe there is no such thing as good news when it comes to regulatory groups—is that regulators from around the world are trying to resolve their issues together. This is important because the states have been loath to cede any of their power to the new Federal Insurance Office (FIO).
Many U.S. regulators are members of the International Association of Insurance Supervisors (IAIS) and are working on a framework for common regulatory standards that could be applied to large insurers that operate both here and abroad.
Regulatory compliance is coming at insurers in three ways these days—local, national, and international. Insurers that were tired of dealing with state regulators are finding that the federal government—through the Federal Insurance Office—is the next area of focus and the global standards of Solvency II must be dealt with as well.
The good old days of insurance regulation are now history. Pushing all regulators to provide some common ground needs to be pursued if insurers are going to be able to find the time to sell insurance.
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