FOR IMMEDIATE RELEASE

REGULATORY FRAMEWORK FOR INSURANCE UNDER REVIEW
Solvency Modernization Initiative Updated as State Regulators Meet
 

WASHINGTON, D.C. (Dec. 2, 2009) — State insurance regulators are undertaking a review of the regulatory framework for insurance markets in the U.S. as part of the Solvency Modernization Initiative (SMI) of the National Association of Insurance Commissioners (NAIC). 

“State insurance regulators are looking outward to gather new ideas and looking inward to see what works, what doesn’t and propose changes to the system,” said Christina Urias, Chair of the NAIC International Solvency Working Group and Arizona Director of Insurance. 

The initiative includes:

• Articulation of the U.S. solvency framework and principles
• Study of other sectors’ (banking) and other countries’ solvency and accounting initiatives and the tools that are used and proposed
• Creation of a new reinsurance regulatory framework
• Movement to principle-based reserving for life insurance products
• Enhancement of group supervision
• Ultimately, implementation of new ideas to incorporate into the U.S. solvency system

Urias cited four “great strides” in the SMI project:

• The Financial Condition (E) Committee recently released a draft of the U.S. solvency regulatory framework and principles. This document will aid progress on the SMI as well as articulate the system outwardly to U.S. federal regulators as well as international insurance regulators.
• The International Solvency (EX) Working Group will release a Consultation Paper about U.S. capital requirements for comment to explore RBC methodology and calculations, international accounting and valuation and potential new group capital requirements.
• The International Solvency (EX) Working Group will release a Consultation Paper about Enterprise Risk Management for comment to explore the possibility of having companies report the significant risks they face and how solvency might be impacted by those material risks. Included in this discussion is the international concept of an Own Risk and Solvency Assessment (ORSA) requirement that an insurer would report to the supervisor.
• The Center for Insurance Policy and Research is hosting a Systemic Risk Panel on Dec. 3, during the NAIC Winter National Meeting in San Francisco. Titled “Perspectives on Systemic Risk,” the session includes a panel of experts to discuss aspects of systemic risk in insurance and its regulation. Panelists will provide an update on international views about systemic risk, discuss its pros and cons and address the concept of “too big to fail.”  

The NAIC International Solvency Working Group will hold an interim meeting next March in Phoenix to discuss the consultation papers. Further discussion of the SMI Roadmap will take place in March 2010 at the NAIC Spring National Meeting in Denver.

About the NAIC

Formed in 1871, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and five U.S. territories. The NAIC has three offices: Executive Office, Washington, D.C.; Central Office, Kansas City, Mo.; and Securities Valuation Office, New York City. The NAIC serves the needs of consumers and the industry, with an overriding objective of supporting state insurance regulators as they protect consumers and maintain the financial stability of the insurance marketplace. For more information, visit www.naic.org.

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