Three prominent insurance executives sharply criticized recent regulatory proposals put forward by the International Association of Insurance Supervisors during the National Association of Insurance Commissioners' International Insurance Forum in Washington. The criticism lodged at the IAIS by the heads of Ace Ltd., Aflac Japan and Jackson National Life Insurance Co. prompted IAIS Secretary General Yoshi Kawai to offer a lengthy defense from the audience of several of the organization's proposals, including the proposed Common Framework for the Supervision of Internationally Active Insurance Groups.The exchange came during a discussion of changes in international insurance regulation and the effect of those changes on the industry in recent years.
Evan Greenberg, chairman, president and chief executive officer of Ace Ltd., said he supports the initial goals outlined by the IAIS for ComFrame. ComFrame is intended to outline common principles that allow international regulators to work together to supervise internationally active insurance groups and close regulatory gaps.
But Greenberg said ComFrame has "veered off course" since it was originally proposed. "Unfortunately, ComFrame goes well beyond concepts of group supervision and supervisory cooperation," Greenberg said. "If ever implemented, it is likely to result in duplicative and, perhaps, burdensome requirements for insurers that will add excessive costs without clear benefit."
Michael Wells, president and CEO of Jackson National Life Insurance Co., said he is a "huge fan" of the regulatory college approach to group supervision that has become common since the financial crisis in 2008. The NAIC describes supervisory colleges as a meeting where insurance regulators can discuss the oversight of one specific insurance group that is writing significant amounts of insurance in other jurisdictions. "It's an outstanding model," Wells said. "It's specific to companies. They're granular in their agenda. And they take a holistic look at groups while being less prescriptive."
Greenberg agreed, adding the IAIS should be looking for ways to make the supervisory college approach more efficient, rather than focusing on ComFrame as it stands now.
Kawai, speaking into a microphone from the audience, addressed the critique of ComFrame by saying he was "astonished by how much gap there is between what ComFrame hopes to achieve and how you perceive what ComFrame is." Kawai said ComFrame is designed to provide a "communicable" language to regulators that allows them to discuss group supervision without threatening to impose on individual jurisdictions.
Greenberg responded, "I think our definition of 'framework' is quite different when I look at the details and the facts of what has been proposed."
Charles Lake, chairman of Aflac Japan, also took issue with the IAIS for a recent paper that he said encouraged countries to support a subsidiary structure for insurance companies in foreign countries rather than a branch structure. In April, a subcommittee of the IAIS adopted a paper on insurance companies that Lake said was biased toward the subsidiary structure that restricts a company's freedom to operate. The IAIS paper came at a time when the Japanese Financial Services Agency said it could require foreign branch companies to convert to independent subsidies. Aflac Japan is a branch of the U.S.-based company.
After initial indications to the contrary, Lake said the FSA has told Aflac Japan that it will not have to convert to a subsidiary. "But this experience highlights the need for supervisors to be attendant to their responsibilities; to be accountable and transparent in their policy making and rule making activities," Lake said.
Lake said the IAIS has a duty to be neutral and balanced when discussing matters of policy because statements by the organization can have an effect on the marketplace.
Kawai said in the course of drafting the paper, the IAIS learned that some regulators are more comfortable overseeing independent subsidiaries, rather than branches of a main company.
The panel also addressed the question of whether being designated a "systemically important financial institution" offers any benefits to a company. The question of what the implications of a SIFI designation has become a frequent topic of conversation as the U.S. Financial Stability Oversight Council enters the final stages of determining whether any non-bank financial institutions will be deemed systemically important.
Greenberg offered a sharp rebuttal to the idea that being a SIFI would allow a company to market itself as extra-safe to consumers.
"That's an academic thought divorced from reality," Greenberg said. "The consumer in the United States could care less that you're designated a SIFI and that somehow someone is protecting you. And in Malaysia? Or Indonesia? Or Vietnam? Neither the individual consumer nor the corporate consumer is going to care."