International Solvency and Accounting (EX) Working Group
International Solvency and Accounting (EX) Working Group Page
Executive (EX) Committee Task Forces and Working Groups Summary Report
Summer 2009 Meeting Summaries Index

The International Solvency and Accounting (EX) Working Group met June 14, 2009.

During this meeting, the Working Group:
                                           

• Adopted with some modifications the Issues for Consideration in the Solvency Modernization Initiative paper and forwarded it to its parent task force. The modifications were to eliminate the detailed example paragraphs regarding systemic risk and to add that the group would be cognizant of developments in other fora, such as any Federal legislation.
• Discussed the implications of the International Association of Insurance Supervisors (IAIS) Insurance Core Principles (ICP) review for future work: It was noted that the April declaration of the G20 committed Financial Stability Board members (which includes the United States) “to undergo periodic peer reviews, using among other evidence IMF/WorldBank public Financial Sector Assessment Program (FSAP) reports.” The FSAP program uses the IAIS ICPs, and the U.S. is currently undergoing an FSAP this year. However the proposals at the IAIS are to replace the current criteria in the ICPs with IAIS Standards from 2011 onward. To the extent that this happens, NAIC members would be evaluated against compliance with IAIS standards in the future. As such, members were informed that IAIS standards could become effectively mandatory in the future, and members agreed to recommend to the parent task force that the U.S. should endeavor to ensure that it either complies with or intends to make any necessary changes to comply with future IAIS standards. As a corollary, the U.S. should vote against standards that do not meet those conditions.
• The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have been charged by the G20 with replacing their financial instruments standards by the end of 2009. In addition, the Insurance Contracts Exposure draft is expected to be issued in the first half of 2010. As such, the two major accounting standards affecting insurer financial statements will not be clear until mid-2010. The Working Group was concerned regarding the current work at the IAIS regarding valuation and its coordination with the work at the accounting standard setters. The Working Group adopted a motion that “it oppose finalization of any IAIS standard and guidance papers on valuation of assets and liabilities prior to the finalization of the converged IASB/FASB Financial Instruments and Insurance Contracts standards.” One member, New Mexico, opposed the motion due to concerns that it would be misinterpreted by international regulators. However, members were generally supportive of the production of an issues or position paper at this stage, and the Casualty Actuarial and Statistical (C) Task Force and the Life and Health Actuarial Task Force are asked to assist in formulating NAIC positions.
• Heard a brief report on the likely nature of a change to the financial instruments standards at the IASB.
• Adopted the interim minutes of the working group.

Action Items:

• Forwarded the modified Issues for Consideration in the Solvency Modernization Initiative paper to the parent task force.
• Recommended to the parent task force that the U.S. should endeavor to ensure that it either complies with or intends to make any necessary changes to comply with future IAIS standards which the US supports in IAIS proceedings. As a corollary, the U.S. should vote against IAIS standards with which it does not agree.
• Members were asked to provide input to the Chair on U.S. views at the IAIS Insurance Contracts Subcommittee for the Chair of that subcommittee in his preparation for a presentation before the joint IASB/FASB boards at their July meeting.