Daily Report for Executives provides in-depth coverage of unfolding legislative, regulatory, and judicial news from the nation’s capital, the states, and around the world. This daily news service...
By Brandon Ross
U.S. insurance companies may have to wait for some time before learning how an international supervisory group will address their concerns on insurance group solvency standards.
The International Association of Insurance Supervisors (IAIS) will release in July the latest version of its guidelines for measuring capital obligations and setting reserves for globally active underwriters. The goal is to help harmonize insurance regulation internationally and increase understanding of insured risk globally.
But key questions about how certain types of common investments will be valued and how regulators will calculate the financial obligations of an insurance group will probably linger awhile because the IAIS Insurance Capital Standard (ICS) 1.0 isn’t expected to address those concerns, U.S. insurance trade groups told Bloomberg BNA. The standard has been in development for years as part of the IAIS’ Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame).
“There are a number of issues in the ICS 1.0 that, if they’re resolved the wrong way, could hurt U.S. companies,” Steve Broadie, vice president of financial policy with the Property Casualty Insurers Association of America, told Bloomberg BNA following the IAIS’ mid-year global seminar in the U.K.
U.S.-based Internationally Active Insurance Groups (IAIGs) that could be subject to the ICS and ComFrame could include companies like Chubb Ltd., Liberty Mutual Insurance Co. and the Travelers Cos. Inc.
Internationally active insurance groups, as defined by IAIS, must:
"[T]he IAIS Executive Committee has created an ICS Task Force comprised of Executive Committee members to provide steer[ing] on outstanding issues to ensure a smooth delivery of ICS version 2.0 in late-2019,” Stephen Hogge, senior policy adviser for communications with IAIS, told Bloomberg BNA in a June 11 email.
Various incarnations of the ICS during development have calculated an insurance group’s total financial obligations at the holding company level. But those calculations don’t take into account how much capital individual subsidiaries, called legal entities, have available to pay claims, the American Insurance Association (AIA) told Bloomberg BNA after the IAIS seminar.
“Capital at the entity level wouldn’t be recognized,” Phil Carson, associate general counsel and director of financial regulatory policy with AIA said.
“You’re going to recognize all the obligations, but you’re not going to recognize all the capital within the group [available] for insurance claims,” Carson said.
As for how insurers’ investments are viewed by regulators, the ICS will use a system that classifies those investments into tiers of capital. Tier 1 is highly valuable capital investment under the proposed system.
Insurers, especially mutual insurers, are concerned that investments in surplus notes will not be regarded as Tier 1 capital under the proposed ICS. How the IAIS will address this concern isn’t expected to be dealt with in ICS 1.0.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)