Transcript GroupSupervision and Systemic Risk for US Insurance Regulation

Group Supervision and
Systemic Risk for US Insurance
Regulation
Ray Spudeck on behalf of Director Ann Frohman
December 03, 2009
US Supervision
 GLB – The role of the Functional Regulator
 Functional Regulation vs. the Integrated Supervisor Model
brings a different set of tools and needs
 Lessons learned from the recent financial turmoil
 Regulatory Reform is in the air, but will still require
coordinated functional regulation and supervision
US Insurance Regulation
 Our system has worked very well by and large
 Focus on the legal entity with analysis of group structures
and relationships – solo plus in the current vernacular
 Want to ensure that our system remains on point in the
world of more complicated and interconnected domestic and
global markets
 Created the Group Solvency Issues (EX) Working Group
under the Solvency Modernization Initiative Task Force
Why the Impetus on Group Supervision
 Better supervision across sectors for US based conglomerates
to contribute to sound insurance markets, improved
management of group-wide risk and enhanced policyholder
protection
 Recognition and equivalence assessment frameworks that are
in development
 We have a lot of insurance groups, of highly divergent size
and complexity
Some Numbers for US Domestic Insurers
 About $22 billion in life and annuity direct premium is
written outside of the US (4%)
 About $9.7 billion in P/C direct premium is written outside
of the US (3%)
 About 20.5% of total US direct premium is written by
insurers with some element (10% or more) of non-US
control
GSI Considerations
 Where do we need to adapt to continue to provide strong
solvency oversight in the world of changing and complex
insurance group structures?
 How should that adaptation be implemented?
 How can we continue to effectively coordinate and
communicate with other regulators and supervisors across
sectors and jurisdictions?
GSI Projects
 Use of supervisory colleges and MoUs – communication and
coordination is critical across jurisdictions and within our
system of functional regulation
 Enhancements to the Insurance Holding Company System
Regulatory Act and Model Regulation
 Draft memo on suggested enhancements for group
supervision to be exposed at the GSI meeting here
Systemic Considerations Flowing From GSI Work
 How do we prevent a future “AIG-like” event?
 What groups really are systemically risky, nationally or
internationally? (Note latest FSB list includes no US insurers)
 What are the realistic options when a significant component
of a group or conglomerate does become insolvent?
 Are the considerations for systemically important groups
different from those not deemed systemically important?
The Work Continues
Thank You