NAIC CEO: US Will Gain Solvency II Equivalence
Copyright: | (c) 2011 A.M. Best Company, Inc. |
Source: | A.M. Best Company, Inc. |
Wordcount: | 595 |
The state-based system of regulating insurance in
"Our system is one that we're quite comfortable with," Vaughan told Best's News Service. "We believe that equivalence should be assessed on an outcomes basis. On that basis, we should be found equivalent."
Representatives of the NAIC and the new Federal Insurance Office regularly engage with their European counterparts on whether, and how, to reach agreement on how industry oversight is treated on each side of the Atlantic.
Solvency II, the EU-wide uniform standard for insurers and reinsurers is set to go into effect in 2013. It will replace a set of requirements created by EU member states over the past 30 to 40 years that many saw as no longer adequate to address today's business practices. Under Solvency II, foreign firms operating in EU countries must be supervised by a "functionally equivalent" domestic regulator to receive equitable treatment.
Vaughan expressed confidence in the NAIC's solvency modernization initiative, which seeks to do for U.S. regulators' requirements for how insurers disclose risks what Solvency II is doing for their EU counterparts. The NAIC does not expect to have their Own-Risk Solvency Assessment draft ready until after the end of this year, commissioners said at the association's fall national meeting.
Vaughan lauded Solvency II's embrace of a risk-based system, saying the SMI, in various permutations since the mid-1990s, is based on that concept. While
"We've made it clear we're not going to adopt Solvency II," Vaughan said. "We have a system. We think our system works. We're engaged in continuous improvement."
The way the U.S. regulates insurance, with no national overseer, is a bit of a puzzler for some EU officials, said
"We can't get 50 states to agree on domestic concerns, much less international," said Mills, a former
What is clear is that
For the U.S., there will be a transitional equivalence process, but the details are still being determined, Vaughan said.
Without equivalence, U.S. insurers doing business in
The major hurdle between U.S. and EU officials is philosophical, Mills said. The two systems cannot be identical, but each side must be able to have faith that the other is making good judgments about the soundness and risk level of the companies they oversee, he said.
"It is in no one's interest for the U.S. to be found not equivalent," Mills said.
(By
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News