PCI remains concerned with the direction of the Reinsurance Task Force regarding its Reinsurance Regulatory Modernization Proposal. The draft reinsurance proposal addresses significant new measures for cross-border transactions and competition, including a new Reinsurance Supervision Review Department within the NAIC, which would assess regulatory effectiveness to determine which non-U.S. jurisdictions are entitled to enter into mutual recognition agreements; a single-state U.S. regulator for U.S. reinsurers, to avoid inappropriate extraterritorial regulation and to adopt uniform minimum standards for companies and states; and a single-state U.S. regulator for non-U.S. reinsurers from RSRD-approved jurisdictions, to allow access to the U.S. market through one port-of-entry jurisdiction.
“The framework as outlined does not provide adequate protection to ceding insurers, certainly not the same level of security to those companies as collateral currently provides,” said Michael Koziol, assistant vice president and counsel for PCI. “We believe the issue of mutual recognition is a critical point and must be resolved prior to the task force proceeding with other outstanding issues in the proposal. Additionally, PCI does not support the concept of a single regulator for reinsurance as it must be the domicile of the ceding company that is regulated for its reinsurance by that regulator. Primary insurer solvency is at the heart of insurance regulation, and that regulator must have the ultimate say relating to the ceding company’s reinsurance program.”
The International Solvency and Accounting Working Group will review recent developments concerning the International Accounting Standards Board’s discussion paper on accounting for insurance contracts. This includes the International Association of Insurance Supervisors’ Insurance Contracts Subcommittee’s response and the Statutory Accounting Principles (E) Working Group’s comments to the U.S. Financial Accounting Standards Board regarding the IASB discussion paper. PCI is disappointed that these groups of international and U.S. regulators appear to support the IASB’s general approach, which would require property/casualty insurers to report their insurance liabilities at “current exit value”, a synthetic market value that PCI believes would lessen the comparability and usefulness of insurer financial statements. The IASWG will also review the work of the IAIS Solvency and Actuarial Issues Subcommittee, which is progressing from IAIS adoption of guidance papers concerning capital requirements, enterprise risk management and insurer internal models to the development of formal regulatory standards dealing with those subjects in 2008.
Also of importance to the PCI is the activity involving the proposed Corporate Governance for Risk Management Act, which is before the Principles-Based Reserving Working Group. The Capital Adequacy Task Force referred the proposal to the working group’s newly-created Corporate Governance Subgroup. PCI has urged the subgroup to begin with a thorough consideration of current corporate governance requirements that apply to insurers before deciding whether to create a new model law. PCI is encouraged by a recent conference call of the subgroup, which indicates that the regulators will begin by considering issues related to the new principles-based life insurance reserve concept.
NAIC staff will present a report to the NAIC/AICPA Working Group on sta