International Solvency and Accounting (E) Working Group
December 2, 2007
1. Report on IAIS Insurance Contracts Subcommittee
At the Chair’s request, Ramon Calderon (CA) provided an update on the work of the IAIS Insurance Contracts Subcommittee. He mentioned that the final draft provided to the Subcommittee had an error in paragraph 54, but that the overall report had been responsive to the recommendations from the Working Group. Many of the suggested NAIC positions had been adopted by the Subcommittee. He noted that the Subcommittee had met in Kansas City November 28 – 30, and had spent considerable time discussing the building blocks approach and in particular the issues surrounding profit on inception. Rob Esson (NAIC) summarized the three alternative approaches supported by various IAIS jurisdictions. Mr. Calderon ended by recommending that there was no necessity for the NAIC to issue a separate comment letter to the IASB. There being no objection, the working group adopted this position.
2. Report on Response to FASB
Joe Fritsch (NY) reported that the Statutory Accounting Principles Working Group had responded to the US Financial Accounting Standards Board (FASB) on their invitation to comment regarding the possibility of the FASB joining the International Accounting Standards Board’s project on insurance contracts. The letter had recommended that the FASB join in a joint project, but had also included the International Solvency and Accounting (E) Working Group letter to the IAIS. The Working Group received the report.
3. Discuss International Solvency
Mr. Fritsch reported that in October the IAIS Technical Committee adopted the documents submitted by the IAIS Solvency and Actuarial Issues Subcommittee. These documents included the three solvency guidance papers on the structure of capital, enterprise risk management, and internal models and a current positions paper on the valuation of technical provisions.
He reported that a meeting of the IAIS Solvency and Actuarial Issues Subcommittee would take place in Paris December 5 – 7, and would discuss first drafts of standards derived from the guidance papers, together with a first draft of a paper on capital resources. He also reported that an issues paper on group solvency issues has been drafted. He proposed a motion that the working group forward the current and subsequent drafts of this document to the Capital Adequacy Task Force and request comments. The motion was seconded by California and adopted unanimously.
4. Report on IAIS Roadmap
George Brady (NAIC) provided an overview of the draft IAIS Roadmap, noting that it was promoting international convergence and future papers that should be well integrated and internally consistent. The main aim was to develop standards that are principles based but with detailed supporting guidance. There was likely over time to be a restructuring of committees. He also mentioned the principle of proportionality and the possibility that the IAIS would require impact assessments as standards were promulgated.
The Chair noted that the IAIS Executive Committee would neet to adopt the Roadmap in January and suggested that the International (G) Committee would need to look at group issues. He also recommended that the Working Group schedule a call in January to discuss priorities.
4. GNAIE/Ernst & Young Presentation: The Role of the Risk Margin in the Calculation of Technical Provisions
Mike McCarter (AIG), representing the Group of North American Insurance Enterprises (GNAIE), introduced Bob Stein of Ernst & Young, who gave a presentation on their recent stuffy on risk margins (Attachment x). There were questions from the Working Group regarding calibration to premium and profit on inception. Mr. McCarter offered to make time to expand the discussion whether at a future interim meeting or a webinar.
Action items: