13 June 2008

US Treasury Norton supports central insurance-sector advisor

The EU’s Solvency II framework potentially will be at odds with the U.S. regulatory structure for insurance, Norton warned, adding that it is unlikely that the EU would find the current U.S. state-based regulatory structure equivalent.

There is an immediate need to establish an insurance-sector advisor at the federal level, as well as to create a federal framework to address emerging international insurance regulatory issues, Deputy Assistant Secretary Jeremiah Norton said. He pointed in particular on the forthcoming Solvency II directive, and on re-insurance collateral and the perceived unequal treatment of certain foreign re-insurers.

 

The EU’s Solvency II framework potentially will be at odds with the U.S. regulatory structure for insurance, Norton warned. “It is unlikely that the EU would find the current U.S. state-based regulatory structure "equivalent" for purposes of allowing U.S. insurers to operate within the EU” he said, meaning that U.S. companies operating in Europe would face unspecified regulatory measures that would increase the costs of their operations and place them at a competitive disadvantage.

 

With regard to re-insurance collateral he noted that the European Commission through its Reinsurance Directive is eliminating collateral requirements among its EU re-insurers, but not necessarily among non-EU re-insurers. “Non-U.S. re-insurers, foreign government officials, and EU representatives believe such cross-border collateral requirements should be reduced or eliminated between jurisdictions of equivalent regulatory re-insurance supervision”, he said and took note that various US state insurance commissioners have launched a series of efforts to address the issue and find a pragmatic solution.

 

Norton testified Tuesday at a hearing to consider a proposal introduced by subcommittee chairman Kanjorski. While insurance companies in the U.S. are largely regulated by the states, Kanjorski's bill would create an Office of Insurance Information within the Treasury Department to help advise the White House and Congress on insurance policy. Supporters say the plan would establish a much-needed unified, federal voice on important global insurance matters.

 

The envisaged Office of Insurance Oversight within Treasury would play a key role in U.S. negotiations with foreign governments, authorities, or regulators, he outlined. It would focus immediately on key areas of federal interest in the insurance sector by serving as an advisor to the Secretary of the Treasury on major domestic and international insurance regulatory issues, he said. The Office would also be provided with authority to address international regulatory issues.

 

However, Norton said he has "some concerns" with a House lawmaker's proposal to create an insurance policy advisory office within the department but generally welcomed the legislation as a positive starting point. “We are confident that we can continue to work together to address these as this legislation moves forward”, he said.

 

Full speech

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