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Group Supervision and Systemic Risk for US Insurance Regulation

Group Supervision and Systemic Risk for US Insurance Regulation. Ray Spudeck on behalf of Director A nn 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

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Group Supervision and Systemic Risk for US Insurance Regulation

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  1. Group Supervision and Systemic Risk for US Insurance Regulation Ray Spudeck on behalf of Director Ann Frohman December 03, 2009

  2. 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

  3. 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

  4. 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

  5. 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

  6. 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?

  7. 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

  8. 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?

  9. The Work Continues Thank You

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